Did Buffett Just Change His Mind on Dividends?

If there is one thing that investors need to know about Berkshire Hathaway shares, it is that they shouldn’t expect any kind of dividend. Buffett has been outspoken on the fact that the company has no intention of paying off a dividend and since he took over the company in 1967 the company has only paid out one dividend of $0.10 per share.

However, during the 2017 Berkshire Hathaway Shareholder’s meeting, Buffett made some comments that made it sound like that hard rule might soon be changing.

According to reports, Berkshire Hathaway currently has an enormous amount of money stored away—in excess of $80 billion in cash, in fact. And, while the company has a rule of keeping at least $20 billion cash on hand for its insurance companies, the extra money is an excess that isn’t currently earning anyone money. In fact, it’s actually harming the company.

So, during the meeting, when Buffett was asked about the possibility of increasing the repurchase price or perhaps paying dividends, his answer was a little surprising.

“When the time comes—and it could come reasonably soon, even while I’m around—and we really don’t think we can get the money out in a reasonable period of time into things we like, we have to reexamine, then, what we do with those funds,” Buffett said during the meeting. “And at that time that we make a decision, it might include both, but it could be repurchases, it could be dividends.”

In the past, Buffett has prided himself on the fact that he could put the dividend money to better use for the company than the shareholders could. However, with a company valued at more than $200 billion, finding meaningful acquisitions that would really make a dent in the cash or in Berkshire’s profits is difficult if not impossible. And, to make matters worse, the money will continue to compound the longer Buffett sits on it.

“There’s no way I can come back here three years from now and tell you that we hold $150 billion or so in cash or more and we think we’re doing something brilliant by doing it,” Buffett said. He went on to say that if the company ever did decide to make a dividend payout, it would have to commit to making that payout over time.

So, while there’s no definitive change in policy yet, the fact that Buffett is even considering it is well worth notice.

Leave a Reply

Your email address will not be published. Required fields are marked *