As a world stock god, Buffett is obviously in a split state. On the one hand, he asked the invested company to increase dividends. On the other hand, his Hathaway company has been penniless for a long time and does not pay dividends. Behind it is that Hathaway uses its profits to make rolling investments, obtain excess returns and bring good compound interest growth to investors.
Buffett's annual return on investment is far from generous, rarely exceeding 20%. Unlike domestic funds, his annual returns tend to double, but Buffett can control his exit well. Under the bear market, Buffett's investment ability is fully exposed and often has positive returns. His long-term steady return on investment is stable, earning hundreds of thousands of times of compound interest, and his stock price is close to 300 thousand dollars.
The income from investing in stocks comes from cash dividends, that is, the dividend rate, and also from the rise of stock prices. Hathaway's return to investors is a rise in share prices.
As a well-known investment listed company, Berkshire almost never pays dividends to shareholders. Although the shareholders' performance in 2020 is not very good, in the financial report of the third quarter of 20 19, Berkshire Hathaway announced better-than-expected earnings and a record cash reserve of128 billion US dollars, but in this case, the company still did not pay dividends. The reason is simple, because Buffett, the founder and CEO of this company, thinks there are many better ways to spend money than dividends. The implication is that dividends are not the best investment strategy to return shareholders.
The point is that reinvestment is the most important thing. In particular, Buffett prefers to reinvest his profits in the company he controls, so as to improve its efficiency, expand its scope, create new products and services, and improve the company's current situation.
By the end of 202 1 and 1, Berkshire's five-year average annualized rate of return was 14.7%.
Like many business leaders, Buffett believes that investing in enterprises has more long-term value than paying directly to shareholders, because the financial success of the company will bring higher return on stock value to shareholders.
Under the guidance of this concept, although the company has a record cash reserve, as long as Buffett is in charge of the company, the prospect of Berkshire Hathaway's dividend is slim. The company only paid a dividend on 1967, and later Buffett joked that he must be in the bathroom when he made this decision.
In fact, Buffett has three priorities for Berkshire's cash use. These items are: 1) reinvesting in the enterprise, 2) making new acquisitions, and 3) buying back the stock when he feels that the stock is "obviously discounted relative to the intrinsic value of conservative estimation". For example, in the third quarter of 20 19, he repurchased 700 million US dollars of company shares.
Statistics prove that Buffett's approach is extremely correct. That is to say, using profits to support the company's financial situation can bring greater wealth to shareholders than dividends. Berkshire Hathaway's BRK-A rose from 1964 to 20 14, an increase of more than 700,000. By the end of 20 18, the annualized income of BRK-A and BRK-B was 10.94%.
Even so, the company's share price is still difficult to outperform the S&P 500.
The prospect of acquisition At present, the company is so successful that it is difficult to refute this practice, but some shareholders did raise objections. Some people think that paying dividends with a small part of the huge cash in hand can completely make shareholders happier.
Of course, some people speculate that Buffett is preparing for a major acquisition. However, by the end of 20 19, the company had not made any major acquisitions for nearly four years.
In fact, since the aborted merger of AOL and time warner Inc. in 2000, no company has bought this number.
Bottom line In a famous letter he wrote to shareholders, Buffett said that Berkshire Hathaway may start paying dividends in 10 or 20 years. The year was 20 18 and Buffett was 88 years old. Unless he really lives forever, it means that his answer to Berkshire shareholders' dividends is still a firm "no".
When will the bonus be paid Under what circumstances will dividends be paid?
Buffett replied at the 20 1 1/Berkshire Hathaway 20 1 1 annual shareholders' meeting that dividends will only be paid if the investment of1USD does not get a value return of more than1USD.
Buffett has always adhered to the idea of snowballing. Buffett has no dividend, and his retained profits can continue to be used for Buffett's investment.
If Buffett pays dividends and gets 1 billion yuan, it means that shareholders get dividend interest and get 1 billion yuan. However, if Buffett invests this 10 billion yuan, according to the annualized return on investment of 20%, then one year later, this 10 billion yuan will become10.2 billion yuan, thus prompting the company's share price to rise. The investor's previous income 1 100 million yuan, if he manages his own money, the probability of yield is lower than this, and Buffett also loses the amount that can be used in Qian Shengqian.
Therefore, this is why even if Buffett does not pay dividends, shareholders have never complained about Buffett, because as long as they buy Buffett's stock, the long-term trend will continue to rise, and the stock price fluctuation has far exceeded the dividend income.
As long as the Buffett team's investment philosophy and stock selection vision have been maintained, then Buffett will not pay dividends.