Comments on: Warren Buffett’s Dividend Stocks

By: Warren Buffett’s Dividend Stocks | Smart Money

Warren Buffett’s Dividend Stocks | Smart Money — Mon, 15 Jun 2009 03:59:28 +0000

[...] post from Dividends Value on Warren Buffett and his penchant for investing in dividend [...]

By: Dividend Tree Potpourri – June 14, 2009 | Dividend Tree

Dividend Tree Potpourri – June 14, 2009 | Dividend Tree — Sun, 14 Jun 2009 22:28:06 +0000

[...] Warren Buffett’s Dividends Stocks [...]

By: Brendan

Brendan — Sun, 14 Jun 2009 15:43:20 +0000

I think maybe I was not understood?
The surplus cash was called “a dividend if you will”. I did not mean a dividend in the legal sense.
When Berkshire acquires these companies 100% they are no longer “on the market”, thus Warren does not intend to sell them for a profit.
why does he own them? For the cash he can extract from them.
If DairyQueen was a public company it could either pay a dividend, or retain cash for growth.
Since Warren owns DairyQueen, he can obviously deploy capital better than most people.
Call it what you want, “cash from investment operations”, or whatever.
DQ doesn’t just leave their extra cash in a PC Financial high interest savings account. It is turned over to the mothership.
I would maybe classify it as a dividend, in spirit, not in law?

By: Dividends4Life

Dividends4Life — Thu, 11 Jun 2009 03:10:22 +0000

Beekums: Your understanding is correct.

Best Wishes,
D4L

By: Beekums

Beekums — Wed, 10 Jun 2009 13:58:17 +0000

Money retrieved from his 100% owned companies isn’t technically a dividend, at least as far as the IRS is concerned. Correct me if I’m wrong, but the money produced by these companies gets taxed once when Berkshire Hathaway gets it. A dividend payed by a public company incurs a tax on the company and a tax on the shareholder that receives the dividend.

By: Brendan

Brendan — Tue, 09 Jun 2009 14:51:21 +0000

Actually, even his 100% owned companies are dividend based stocks.
I am sure that Dairy Queen, See’s, and Geico keep whatever cash they need to sustain/grow the business. All the left over cash, a dividend if you will, is turned over to Warren for redeployment.

By: Beekums

Beekums — Tue, 09 Jun 2009 12:59:06 +0000

The dividends may have little bearing on Warren Buffet owning those dividend paying stocks.

The double taxation on dividends would imply that most non-REIT companies are wasting money by paying dividends since more of it is being given to the government. However, once a company reaches a certain size and it’s market is saturated, it can no longer provide a good return by spending it’s capital. At this point the company is better serving it’s investors by paying a dividend despite the double taxation. I don’t think dividend paying stocks always outperform non-dividend paying stocks, it’s more likely that most companies don’t realize that they’ve reached a point of diminishing returns on the capital they deploy and that it’s time for them to start paying dividends.

Berkshire Hathaway has so much capital to deploy that it’s not worth the effort to find smaller companies to buy. This leaves Buffet with a pool of larger companies who are most likely at the point where growth is limited and paying dividends would provide the best return.