Does Berkshire Hathaway Pay Dividends?

Berkshire Hathaway Inc. (NYSE:BRK.A) is a giant holding company and one of the largest in the world. It’s a component of the S&P 100, S&P 500, and it’s basically used as Warren Buffett’s investment firm.

The company’s wholly owned subsidiaries included GEICO, Duracell, Dairy Queen, Fruit of the Loom, Pampered Chef, Helzberg Diamonds, and more. It also owns major stakes in Apple (AAPL), American Express (AXP), Pilot Flying J, Bank of America (BAC), and Kraft Heinz (KHC) among others.

For income-oriented investors, the million dollar question is does Berkshire Hathaway pay dividends?

Its Class A shares are among the highest priced in the world. It’s also the eight largest public company and largest financial services company in the world. It’s rock-solid proof that head Buffett is truly the Oracle of Omaha.

It has a complicated relationship with the stock market though. You’ll find Berkshire Hathaway’s investments aren’t always in lockstep with the statements of its famous CEO. He gives investment advice throughout financial and business media outlets, but he doesn’t always follow his own recommendations.

Let’s break down the Berkshire Hathaway dilemma.

Warren Buffett Dividends Philosophy

Warren Buffett doesn’t believe in paying dividends to Berkshire shareholders. In fact, Buffett often says companies pay dividends when they don’t know better ways of generating investment returns. Berkshire would rather spend its cash buying companies than paying investors.

And it’s not like the company doesn’t have money. In fact, the company held a record $137 billion in cash in 2020.

This is despite going on a major stock grab in the aftermath of coronavirus outbreak. After seeing some investments crash and stay down, he bought major stakes in a lot of big companies. There’s one thing that approximately three quarters of Berkshire’s investments have in common – they pay dividends.

But Berkshire has three priorities ahead of paying any investor dividends:

1.     Reinvesting in the business. Buffett is a financial guru and uses his cash to increase shareholder value through improving the businesses he owns. Any spending on the business is worthwhile if it increases the overall value.

2.     Acquiring new businesses. Berkshire went on a spending spree in 2020, buying big stakes in Snowflake, Kroger, Pfizer, and GM, among others.

3.     Buying back stock. Berkshire bought back $15.7 billion of its own shares in 2020, making Berkshire Hathaway stock one of Berkshire Hathaway’s biggest investments. It’s its own whale investor.

Buffett loves having cash on hand, and dividends are an easy way to gain residual payments. When it comes to paying dividends, he has a completely different perspective though.

Does Berkshire Hathaway Pay Dividends?

None of Berkshire’s shareholders ever received a dividend. They don’t expect to see one soon either – if the company wants to bring value to shareholders, it buys stock back.

Stock buybacks reduce the supply of shares, which essentially then increases the share price. As a financial wizard, Buffett knows buying stock back keeps driving his Berkshire shares up. And he’s never done a stock split either.

That makes Berkshire Hathaway Class A stock the most expensive stock of all time, worth over $340,000 per share by the start of of 2021.

You could buy a house for the price of one Berkshire Hathaway share. It’s only accessible to the average person through Class B or fractional shares on a brokerage that supports fractional share purchases. He took an old-fashioned approach that made his company one of the most valuable investments in the world.

But none of this financial talk is really what Buffett prefers. He would rather generate a return through products and services under his umbrella of companies. And that’s the irony in Buffett’s dividend philosophy.

The Berkshire Hathaway Dividends Irony

Buffett knows he can provide more shareholder value by following his own investment philosophy. But he doesn’t necessarily invest in companies that follow his advice, and that means the vast majority of his investment portfolio is in dividend-paying stocks.

Apple pays 1.4 percent dividends. Bank of America pays 2 percent dividends. Coca-Cola, American Express, Kraft Heinz, and Delta Air Lines are all dividend-paying stocks. And these are just the major stakes the company holds.

Berkshire was deeply vested in Costco until late 2020. It has stakes in a variety of dividend-paying banks, Johnson & Johnson (JNJ), Restaurant Brands International (RBI), Suncor Energy (SU), UPS (UPS), Mondelez (MDLZ), and Verizon (VZ). Each pays dividends.

In fact, it’s easier to list stocks like Charter Communications, Verisign, Davita, and United Continental as the small handful of stocks Berkshire owns that don’t pay dividends.

He loves money, and insurance is Berkshire’s biggest cash cow. It keeps the company liquid and enables all the spending he does.

But the company doesn’t pay dividends to its own shareholders. It never will while Buffett is at the helm, but there’s a lot of speculation about how the firm will do business without him. He’s 90 years old, and new leadership is probably going to assume the thrown in the not too distant future.

When Buffett dies, the new leadership could contort his initial vision like Apple did to Steve Jobs before him.

Will Berkshire Hathaway Pay Dividends?

A Warren Buffett retirement is a funny thing to consider at this point. He’s 90 – but showing no signs of stopping. We often look at 65 as a retirement age, but the truth is many people work longer.

Investing is what Buffett loves, and it’s what he’s likely going to continue doing until the day he dies. When he does die, he’ll be replaced. Many believe Greg Abel, Berkshire Hathaway Energy’s chairman and CEO, is first in line. It will inevitably be decided by the board.

When that happens, a dividend could happen. As soon as Berkshire loses value, drastic measures will eventually be taken. Like the empires of Rockefeller and Carnegie before him, Buffett will eventually be dethroned and his legacy tainted.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.