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SDS (Seductive Dividend Stocks)
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Sorry I hide my true identity but I'm a physicist/engineer, native contrarian and idea generator. I am an eclectic dividend investor with motto "In God We Trust, All Others Pay Cash" applied to companies I invest in. I like to read /and read a lot - did you look on my SA photo 8-)? / including... More
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  • Warren Buffett and dividends (Jan 18, 2012) 1 comment
    Jan 18, 2012 8:36 AM

    According to the legend the engine of one of the most successful investors in the world Warren Buffett (NASDAQ:WB) Berkshire Hathaway /BRK.A/ paid dividends only once when WB left for a restroom during annual meeting. Many dividends opponents refer to WB dividend policy in order to critisize dividend-oriented investing.

    WB is right about tax disadvantages of dividends and he was probably right with his dividend attitude about 30 years ago. But I think he is wrong last 10+ years and now. Let me explain why I think WB approach to dividends should be diffrent now.

    In order to make difference in BRK.A performance WB needs to invest around $5 billion in a good company. So his investment universe is limited to big companies only.  In order to make difference in Average Joe (AJ) performance probably AJ needs to park around $100 thousand in a good company.  Even if AJ is not as good capital allocator as WB it is much easy for AJ to find a good investment between big and small companies than for WB.

    Therefore, I think WB should be more friendly to AJ and  BRK.A should pay dividends, e.g. a fixed percent (at least 20%) of earnings.

    Disclosure: I do NOT own Berkshire Hathaway because they do not pay dividends.


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