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" By now it’s fair to ask: Who cares? Nvidia has spent massively on stock buybacks—although not enough to meaningfully reduce its share count. More importantly, the S&P 500 has returned 278% over the past decade, beating the S&P 500 Dividend Aristocrats, a subset of companies with many years of raising payments, by more than 100 points. But that is partly to do with recent valuation bloat. The S&P 500 has plumped up to 25 times projected earnings from 19 times three years ago. If you invested in the Aristocrats index at inception just over 20 years ago, and checked three years ago, you would have made 402%, and beaten the S&P 500 by 80 points.

That’s no anomaly. From 1973 through the end of last year, companies that grew or initiated dividends returned an average of 10.2% a year, versus 4.3% for nonpayers and negative returns for dividend cutters and quitters, according to data compiled by Hartford Funds. Since 1960, dividends have contributed 85% of the S&P 500’s total returns, such is the long-term power of compounding."


https://www.barrons.com/articles/nvidia-tiny-divid...

" That’s no anomaly. From 1973 through the end of last year, companies that grew or initiated dividends returned an average of 10.2% a year, versus 4.3% for nonpayers and negative returns for dividend cutters and quitters, according to data compiled by Hartford Funds. Since 1960, dividends have contributed 85% of the S&P 500’s total returns, such is the long-term power of compounding.

The intermediate-term power isn’t bad, either; dividends have kicked in 34% of total returns during the average decade since 1940. And during big downturns since 1975, dividend payers lost only 14.4% on average, versus 19.9% for the S&P 500, and 28.2% for nonpayers."




for us, suckers, out there who took investing 101.

another article in Barrons, " 15 Dividend Stocks to Buy in a Market That Hates Payouts."

"S&P 500 companies have paid out about $720 billion in dividends over the past 12 months, almost 40% of reported net income, according to Bloomberg. The index is expected to grow earnings by about 12% in 2025 and another 13% in 2026. So to meet Parker’s criteria, companies with a penchant for increasing payouts need to pay less than 40% of net income as dividends and have market-like expected earnings growth."


https://www.barrons.com/articles/15-dividend-stock...

From 1973 through the end of last year, companies that grew or initiated dividends returned an average of 10.2% a year, versus 4.3% for nonpayers and negative returns for dividend cutters and quitters, according to data compiled by Hartford Funds. Since 1960, dividends have contributed 85% of the S&P 500’s total returns, such is the long-term power of compounding.

Any analysis that starts with 1973 or 1960 is going to be skewed by the fact that stock buybacks weren't much of a thing before 1982. Dividends were the only game in town.

“ The late 1980s and 1990s: The second surge
Performance-based pay: A renewed push began in the late 1980s to link executive pay more closely to performance.
Accounting rules: Changes to accounting rules, particularly in the 1990s, made it easier and more favorable for companies to grant options, leading to their widespread adoption for top executives.
"Aggressive use": This period saw a dramatic increase in the number of stock options granted, with some studies showing that by the late 1990s and early 2000s, options were a dominant form of equity compensation for CEOs in many firms. “ Many of us bought Brk decades ago because we knew Buffett wouldn’t grant options for 2-4 percent of the company to execs annually. That’s why buying back our shares in 2005 was very obvious.

Any analysis that starts with 1973 or 1960 is going to be skewed by the fact that stock buybacks weren't much of a thing before 1982.

That doesn't matter to people who believe that dividends are free money.

You look at total returns and pick out one piece of it and say "This piece was 85% of the reason for the total return". No, it's just a component that can be easily identified.

What's the point of getting a dividend if you are just going to reinvest it in the company? Better for the company to have kept it internally in the first place. Plus you pay tax on the dividend so you lost 15% and only reinvest 85% of it.

" That doesn't matter to people who believe that dividends are free money."


Can you please inform Buffett that buying and holding div paying stocks, is for suckers. Thank you.

priceless.

" That doesn't matter to people who believe that dividends are free money." - rayvt

"Can you please inform Buffett that buying and holding div paying stocks, is for suckers." - Harold in Las Vegas

You are twisting his words into something he is not saying. There are really only two explanations for this. The first, you are incapable of understanding of what he is actually saying. The second, you understand what he is saying but dishonestly change it.

Which is it Harold? Are you stupid or dishonest?

There isn't really any other explanation.

MSFT, aapl, googl, all pay a small dividend. The suckers who bought those shares haven’t done to bad. Priceless.

" That’s no anomaly. From 1973 through the end of last year, companies that grew or initiated dividends returned an average of 10.2% a year, versus 4.3% for nonpayers and negative returns for dividend cutters and quitters, according to data compiled by Hartford Funds. Since 1960, dividends have contributed 85% of the S&P 500’s total returns, such is the long-term power of compounding.

This statement is false. Please ignore it.

The way the study was done, you have to know in advance which firms were going to cut their dividends, right?
If you know the future, there are much easier ways to get rich than buying the ones that are going to increase their dividends in future : )

If you consider only what is knowable in advance, comparing dividend payers and non-dividend-payers is basically a wash. You get one group or the other pulling ahead a tiny bit depending on the precise date range you look at and how often you reconstitute the portfolio, but it's basically a tie within rounding error. Which makes sense: if there were a (true) conventional wisdom that one easily identified group reliably outperformed the other over time (as opposed to merely cyclically), investors would buy the outperforming group, bidding up the cost of entry and erasing the advantage for subsequent investors. There is famously no such thing as an easy free lunch.

Here is an example date range:

Among the largest 1000 US-domiciled firms (in effect the Russell 1000), in the 20 years 2005-2024:

Dividend payers, defined as those expected in advance to pay a dividend in the coming year: CAGR 10.06%/year.
Those not expected to pay a dividend in the coming year: CAGR 10.75%/year
Within the dividend paying group, the half with the higher expected dividend yields as a function of purchase price underperformed the half with the lower expected yields.

In this particular date range the no-dividend crew came out ahead, but as mentioned, it depends on the date range you pick. It's usually a tie, or close to it.

Note, the first figure for dividend stocks assumes "dividend reinvestment" calculated the usual way. i.e., it assumes you could and would re-invest dividends without tax or transaction or borrowing costs at market close on the ex-dividend date (which you can't). So the figure is an exaggeration.

It's worth noting that, unsurprisingly, the fraction of total return coming from dividends was higher in the deep past when dividend yields were very much higher. The average dividend yield of the S&P 500 and its predecessors in (say) the 1950s was 4.88%, versus 1.53% in the 2020s so far. Different starting situations mean different outcomes. Phrased another way: if your portfolio is yielding a 2% dividend rising with inflation and you're expecting a total return of (say) inflation + 6.5%/year, dividends are necessarily going to provide less than a third of your total returns if you meet your return goal. Not 85%.

Jim

“ It's worth noting that, unsurprisingly, the fraction of total return coming from dividends was higher in the deep past when dividend yields were very much higher. The average dividend yield of the S&P 500 and its predecessors in (say) the 1950s was 4.88%, versus 1.53% in the 2020s so far. Different starting situations mean different outcomes. Phrased another way: if your portfolio is yielding a 2% dividend rising with inflation and you're expecting a total return of (say) inflation + 6.5%/year, dividends are necessarily going to provide less than a third of your total returns if you meet your return goal. Not 85%.”

Though it occurs to me that 1.53% could well be 85% of the real return from the S&P500 for the next 10 years or so…

" That doesn't matter to people who believe that dividends are free money."


Can you please inform Buffett that buying and holding div paying stocks, is for suckers.

I believe that the BRK companies are essentially subdivisions of Berkshire. In effect the "dividend" they pay to Berkshire are just the company transferring cash from one division to another.
Kind of like when you give money to your spouse. It's not new money coming in, it's just shuffling your own money from one pocket to another.


People get soooo confused about dividends.

BWDIK?

MSFT, aapl, googl, all pay a small dividend. The suckers who bought those shares haven’t done to bad.

People don't buy MSFT, aapl, googl for the dividend. It's just a gnat that is attached.

People buy "Dividend Champions" for the dividend.

Priceless

People buy "Dividend Champions" for the dividend.

Surprisingly to some, this also is not that great an idea.

As "Goodhart's Law" notes, "When a measure becomes a target, it ceases to be a good measure". The dividend champions used to be a great list of firms, but then people started looking for firms that had increased their dividend every year for X years. At that point the group started getting a lot of firms doing not that great, who were purposely increasing the dividend a negligible amount each year just to stay in the list!

If you're going to build a dividend payer portfolio, it's better to look for the best quality firms you can find at the yield level you desire. High ROE is probably the simplest metric that adds value.

High rate of sales growth per share isn't bad, either: it would keep you away from things like Pitney Bowes. (nice juicy 3.74% yield, with both business and stock price that have been fading for 25 years now)

Jim

“ People don't buy MSFT, aapl, googl for the dividend. It's just a gnat that is attached.” Priceless. Do any of brks public holdings use the gnats to feed the shareholders? Thank you.

I don’t understand the obsession on this board with dividends.

Berkshire’s CEO is/was a legend. When has he ever stated that he bought XYZ BECAUSE of its dividend. He has commented that he likes getting dividends, but he has almost always preached repurchases over dividends.

“ Berkshire’s CEO is/was a legend. When has he ever stated that he bought XYZ BECAUSE of its dividend. He has commented that he likes getting dividends, but he has almost always preached repurchases over dividends.“ To repeat, can you name the last five public companies purchased in size by Buffett that do not pay a dividend? Is Buffett a dividend buying, sucker? Thank you.

“ I don’t understand the obsession on this board with dividends.”

The board isn’t, just one poster is.

Berkshire might or might not ever pay a dividend. Nothing any of us can do about it. I know I really don’t want a dividend. I prefer cap gains, and lots of ‘em :-)

So, logically, if he buys stocks that pay diva, AAPL, CB, STZ, OXY…then it stands to reason that Berkshire must/should pay a dividend?

Is this the crux of the argument?

So, I played along and gave u names that pay dividends.

So, do me the same courtesy and answer my question. Do you think he bought those because they paid a dividend? Was that part of his checklist? Or more so that he thought the stocks were attractive. Was the dividend a requirement?

Many of the new kids on the block here don’t know I was the only fool pounding the table for an authorized buyback in 2006. Next year Brk will begin a quarterly dividend of at least 50 cents per B share, or, they will be late again and do it in 2027, Watch. No point in further debating the obvious.

Btw, why did Buffett get “ suckered “ into buying dividend paying ibm when he should have been buying back non dividend paying brkb? Remember who pounded that table in real time? Buy brkb not ibm. Watch.

HC, please start putting a couple of carriage returns between the text you are quoting and your own follow-up comments. That will make it much easier for these old eyes to distinguish the difference. Thanks.

No point in further debating the obvious.

Is this you, promising not to bring it up again? Hot diggity dog! 😃

Agree that eventually a dividend will be paid but extremely unlikely that it will be initiated during Greg's first year as CEO.

Also the Google purchase....my guess is that it was done by Greg.

Years ago BRK bought Verizon and several large health care stocks all of which paid generous dividends. They were short term trades and at that time there was some speculation that they were bought, especially Verizon, for the dividends.

Good morning bud, do I have to remind you,

"
Years ago BRK bought Verizon and several large health care stocks all of which paid generous dividends. They were short term trades and at that time there was some speculation that they were bought, especially Verizon, for the dividends."




"There's a sucker born every minute" is a quotation often associated with P. T. Barnum, an American showman of the mid-19th century, although there is no evidence that he actually said it. Early instances of its use are found among salesmen, gamblers and confidence tricksters."

priceless wisdom in the land of brkville, hclasvegas

Btw, why did Buffett get “ suckered “ into buying dividend paying ibm when he should have been buying back non dividend paying brkb? Remember who pounded that table in real time? Buy brkb not ibm. Watch.

Some people won't listen, but one can always try:

It is not foolish to buy a dividend stock. Nobody ever said it was. Mr Buffett is not a fool.

It is always extremely foolish to buy a poor investment just because it promises a dividend. This is a very common form of foolishness, the suckers that were mentioned earlier.
It's usually foolish to forego a good investment because it has no dividend, since most portfolios are best served by maximizing total return. Emphasis on "usually".

A firm introducing a dividend does not increase the total return for shareholders compared to the status quo, even before tax. (Unless/until all other reasonably foreseeable alternative uses of that capital offer prospective returns below those generally available to investors: it's better to pay it out than to set it on fire)

I presume we can all agree on all of those points and move on.

Reasonable people might have differing opinions about whether Berkshire can find a way to deploy excess cash well enough and soon enough that the real total return will exceed that of the average equity investment in (say) the next 10 years. That's the real determinant of whether they should or should not pay out some of that cash as dividends, not whether some small fraction of shareholders has an irrational phobia of capital gains tax even if paying it makes them richer.

Jim

“ It is not foolish to buy a dividend stock. Nobody ever said it was. Mr Buffett is not a fool.“. Thanks for the clarification old bud. Next year I’m looking for your explanation of why brkb thought it was the appropriate time to initiate a small quarterly dividend. We Shall see.

stock buybacks weren't much of a thing before 1982

Coincidentally, compensation in the form of stock weren't much of a thing back then either.

😀

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