Be nice to people. This changes the whole environment.
- Manlobbi
Halls of Shrewd'm / US Policy
No. of Recommendations: 1
PE Yield
aapl 37 .35
dell 31 .64
nvda 31 .49
msft 25 .87
googl 28 .24
orcl 38 .94
cost 49 .61
wmt 42 .83
Conclusion reached by most on this board. IF these companies didn't pay a small dividend their valuations and totals returns would have been higher.
Did Buffett ever complain that aapl paid a small dividend?
Rod Serling in his prime, couldn't make this up. Carry on.
No. of Recommendations: 1
aapl 35 xs PE today, all time new high, PLUS< that juicy 1.08 dividend.
Not a bad stock despite capital allocation errors. :)
No. of Recommendations: 1
A thousand dollars invested in AAPL over the last 12 min would have bought us an equivalent of a BRKB share. The dividend might have bought us a Cherry Coke.
UCMTSU It’s the horse and jockey that count. Thank you Tim Apple!
No. of Recommendations: 0
*last 12 mos.
No. of Recommendations: 4
Looking at dividends, I think the analysis should be based on the marginal dollar added to the cash pile versus the average dollar in the cash pile.
I am assuming the following:
1. Over the next 10 years, BRK will earn $500B. Current earnings per year plus 7% nominal growth.
2. $100B of stock will be sold due to valuations exceeding prudent levels e.g. Apple or the company no longer fits the required profile. Note is not net, just sales.
3. There is currently $100B excess cash above operational needs.
Based on these assumptions, BRK has to allocate $70B per year for the next 10 years to get the cash level down to $300B.
Buy backs over the last 10 years average $8B per year, going forward say $10B per year which leaves $60B per year.
My opinion, based on previous BRK actions, it is unlikely that $60B per year on average will be deployed. As such, the cash will continue to increase and the marginal rate of return on the cash increase will be 4% less 15% for corporate tax which equals 3.4%. After 10 year's, the $1 will be $1.4.
Alternately, the $1 could be issued as a dividend. I would receive $0.7 after tax. Then invested in a broad basket of stocks which will grow at a nominal value of 9% (slightly lower than 60 year long term average). The $0.7 will grow to $1.66. I will then pay 20% tax on the capital gains and have $1.47.
Seems to me that it is better to get a dividend than have BRK hold the marginal dollar in short term treasuries.
Aussi
No. of Recommendations: 15
Looking at dividends, I think the analysis should be based on the marginal dollar added to the cash pile versus the average dollar in the cash pile.
I am assuming the following:...
Good way to think of things, I like it.
In particular, this bit--
Buy backs over the last 10 years average $8B per year, going forward say $10B per year which leaves $60B per year [to allocate]"
I'd use after-inflation estimated returns for everything. It tends to emphasize that the real after-tax return on cash is likely zero.
But the later part with the conclusions concerns me.
An estimate of getting a nominal 9% easily in the US stock market in the next decade leaves me more than a bit dubious. Even if stock valuations went only 1/4 of the way back down to the "old normal" over the next ten years, those sort of returns would be hard to come by. e.g., Even if the market were at the level that was still more expensive than 75% of the time this century based on smoothed real earnings, the index would be 28% lower right now. If it glided down to that "richer than usual" level over ten years, it would be a drag of 3.2%/year.
Jim
