BERK­SHIRE SOCKS IT TO ’EM

Finweek English Edition - - INVESTMENT -

War­ren Buf­fett has writ­ten his an­nual chair­man’s let­ter, which you’ll f ind at berk­shire­hath­away.com. It is, as al­ways, an ex­cel­lent read full of sharp in­sights, funny chirps and of course price­less ad­vice for in­vestors as he lets us into his think­ing. This year one of his themes is div­i­dends. Berk­shire Hath­away is fa­mous for never paying a div­i­dend while at the same time Buf­fett is fa­mous for lov­ing the com­pa­nies Berk­shire Hath­away owns or con­trols to pay div­i­dends. Per­son­ally, I have al­ways been a div­i­dend fan but Buf­fett makes a very strong case for not paying div­i­dends, sug­gest­ing that the money is bet­ter kept within the com­pany to grow the busi­ness and hence fu­ture prof­its. He then adds that if in­vestors want in­come, they are bet­ter served by mak­ing sales of the stock ev­ery year rather than re­ceiv­ing div­i­dends. Cer­tainly his maths adds up al­beit there are a num­ber of as­sump­tions such as the abil­ity of the com­pany to suc­cess­fully use the ex­tra cash, not paid out in div­i­dends, to grow the busi­ness. But over­all it has got me re­think­ing my stance on div­i­dends.

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