> Warren Buffett Blog: Berkshire shares dont pay dividend

Monday, March 24, 2014

Berkshire shares dont pay dividend

Warren Buffett prizes having a margin safety when selecting investments for Berkshire Hathaway's investors. But when it comes investors buying Berkshire Hathaway's stock, the company doesn't offer its investors the comfort of a dividend.

Investors are often surprised Berkshire Hathaway doesn't pay a dividend. Even giant tech companies like Microsoft, Apple and Oracle, who skipped paying dividends for years so they could invest in their future growth, are all paying them now.

Dividends certainly offer investors some degree of safety. Investors like them not just for the income, but for the financial discipline they enforce. Buffett probably knows this just as well as any, since he's long favored many stocks with large dividends. Many of Berkshire's "Big Four" investments are also notable payers of dividends. American Express, Coca-Cola, IBM and Wells Fargo pay 1%, 3.2%, 2% and 2.5% dividend yields, respectively.

Investors don't need to avoid Berkshire Hathaway just because it doesn't pay a dividend. Its price appreciation has been strong enough reward long term. But as the company gets larger, it's increasingly becoming just a benchmark of the broad market. And by investing in an index fund that tracks the market, investors can get the same diversification, and a dividend yield of nearly 2%.