When Will Buffet Pay You For Owning Berkshire Stock?

The partners Warren Buffett and Charlie Munger purchased Berkshire Hathaway textile company just over 51 years ago. Since that time the company has produced billions of dollars in net profits and surplus cash flows, yes has issued just one dividend to shareholders. Why? Well, this is a unique company because of its distinct focus on the security and robustness of its equity position. Berkshire Hathaway has not and will not jeopardize the integrity of its equity value by compromising future cash flows with interest payments or other long-term obligations demanding cash payments of substantial size in proportion to its regular earnings.

Keeping all of owner’s earnings — surplus cash thrown off through profitable enterprise — inside of the business is one way the partners have ensured a growing capital base and enhanced the price stability of the company’s publicly traded shares. To that end Berkshire has not paid a dividend for over 50 years. But it isn’t that Warren Buffett and Charlie Munger are against dividends. They simply believe that so far they are able to create more wealth for owners of the company through the tax-advantaged and operationally advantaged reinvestment of the conglomerate’s earnings.

“You should wish your earnings to be re-invested [by the company] if they can be expected to earn high returns, and you should wish them paid to you if low returns are the likely outcome of re-investment.” -Warren Buffet

Like I said the partners are not anti-dividend. In fact, Mr. Buffett once laid out a clear rule the company goes by to determine whether or not they will issue dividends. We are going to do a check up on that dividend rule today to learn how close or how far the marketplace is from seeing a Berkshire Hathaway cash dividend.

Since now you know basic criteria that Warren Buffet and Charlie Munger use to decide whether they will pay a dividend (see the italicized quote above), your intuition alone is probably enough to decide whether or not Berkshire Hathaway will be paying a dividend anytime soon.

But if you’d like more details on the specific “Warren Buffet’s BRK.A/BRK.B Dividend Test” check out the recent Berkshire Hathaway dividend analysis here, valid through at least 2018.