Why doesn’t Berkshire Hathaway pay a dividend?

Investopedia

A:

Berkshire Hathaway (BRK-A, BRK-B) does not pay a dividend because its chairman and CEOWarren Buffett, believes it is more beneficial to allocate the company’s earnings in other ways. In particular, Buffett prefers to reinvest profits in things that allow his company to improve its efficiency, expand its reach, create new products and services as well as improve existing ones, and further separate itself from competitors. Buffett, like many business leaders, feels that investing back into his business provides more long-term value to shareholders than paying them directly because the company’s financial success rewards shareholders with higher stock values. While the company does not pay a dividend, it does however have a prudent stock buyback policy that works to put cash directly into shareholders’ pockets.

Despite the company having billions of dollars of cash on hand, the prospect of a Berkshire Hathaway dividend is dim as long as Buffett is in charge. The company has paid only one dividend during his reign, in 1967, and Buffett later joked he must have been in the bathroom when the decision was made. Nevertheless, statistics give credence to Buffett’s stance that using profits to buttress the company’s financial position results in greater wealth for shareholders than paying dividends. Berkshire Hathaway’s BRK-A increased by almost 700,000% between 1964 and 2014. BRK-A and BRK-B are both reporting annualized ten year returns of 10.94% respectively as of October 12, 2018. (See also: Berkshire Hathaway Stock Prices)

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