I would suggest that anyone wanting to make the case that Berkshire pay a dividend simply invoke
item #9 of the Berkshire Owner's Manual (which has subsequently been revised):
"We test the wisdom of retaining earnings by assessing whether retention, over time, delivers shareholders at least $1 of market value for each $1 retained. To date, this test has been met. We will continue to apply it on a five-year rolling basis...." That's black and white. A five-year rolling basis test, not a prospective outlook. Why say it and then not mean it (or qualify it to slide through unforeseen circumstances)?
Of course, most - if not all - rational Berkshire shareholders want Berkshire to hold onto the money because (a) there's hardly been a better time for Buffett to reinvest earnings versus us doing it ourselves (after tax, no less), and (b) let's not forget that Berkshire's major operating business is insurance, and its net worth is a significant competitive advantage. Why arbitrarily reduce it?
We really do want Buffett to mean 'prospective.'
One thought: Buffett has said that the increasing proportion of the company being held by charitable entities (his and those of quite a few other long-time holders) will not influence dividend policy. When the majority of shares is actually held by charities, though, each with some sort of annual spending commitment, a dividend could someday make sense, and in fact be important for those charities that really don't want to have to sell a share.
item #9 of the Berkshire Owner's Manual (which has subsequently been revised):
"We test the wisdom of retaining earnings by assessing whether retention, over time, delivers shareholders at least $1 of market value for each $1 retained. To date, this test has been met. We will continue to apply it on a five-year rolling basis...." That's black and white. A five-year rolling basis test, not a prospective outlook. Why say it and then not mean it (or qualify it to slide through unforeseen circumstances)?
Of course, most - if not all - rational Berkshire shareholders want Berkshire to hold onto the money because (a) there's hardly been a better time for Buffett to reinvest earnings versus us doing it ourselves (after tax, no less), and (b) let's not forget that Berkshire's major operating business is insurance, and its net worth is a significant competitive advantage. Why arbitrarily reduce it?
We really do want Buffett to mean 'prospective.'
One thought: Buffett has said that the increasing proportion of the company being held by charitable entities (his and those of quite a few other long-time holders) will not influence dividend policy. When the majority of shares is actually held by charities, though, each with some sort of annual spending commitment, a dividend could someday make sense, and in fact be important for those charities that really don't want to have to sell a share.
