Michael Smith - Berkshire Hathaway

Berkshire Hathaway May Start Paying Dividends

5/10/2017

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According to Fortune Magazine , Berkshire Hathaway is now considering initiating dividend payments. Berkshire Hathaway is a publicly traded corporation led by legendary investor Warren Buffett. While Buffett considers dividends as part of his investment strategy, Berkshire has never paid a dividend. Buffett feels that Berkshire can make more money for investors by  reinvesting its profits rather than paying dividends. Yet he seeks dividend payers as he invests Berkshire funds. Additionally, Buffett has advised for quite some time that retirement savers invest in dividend payers as part of their personal investment strategy. Buffett, now 86 years old, is reportedly considering retirement. For years Berkshire has not bought back its stock. It is now considering stock-buybacks. Berkshire has made substantial investments in Apple, the world’s top dividend payer in total dollars. According to the Wall Street Journal, Apple has repurchased almost 21% of its stock since 2012. Buybacks, along with the iPhone’s success, have contributed to Apple’s rising earnings per share and its record high stock price of $153.99 on May 9.  Apple’s market capitalization is more than $800 billion, a first for any U.S. company. For many years the company, led by world’s greatest investor, has avoided paying dividends and buying back stock. It has now invested in America’s largest company which pays more in dividends than any company in the world and has bought back more than 20% of its stock. Questions: What is a good stock buyback? When should a corporation pay dividends? Should an investor buy dividend-paying stock?

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