8 ms·

What do you get from having your savings in BRK? I thought they don't return anything to shareholders?

• zrail 9y ago
  Capital gains over time, plus the significant possibility of dividends when Buffett and Munger finally give up the ghost.
• graeme 9y ago
  Buffet's letters cover this well with respect to other stocks. Basically: if a company reinvests profits and grows, you as owner now own part of a more valuable thing. This will increase share value on average over time. This isn't speculating in a capital gains increase. This is a measureable increase in value based on earnings. So, if coca cola increases profits, berkshire can reasonably expect this is to their direct benefit: even if coca cola pays no dividend. They could have basically. And you can realize a gain when you eventually sell.
• anonu 9y ago
  Interesting thought. I suppose it depends on whether you believe in the dividend irrelevance theory or not. Who can put money to better use? You or Warren?
  • leetcrew 9y ago
    if you think you can make better use of the dividend, why buy that company's shares at all? even if a dividend were break even compared to the capital gains from reinvesting directly, you would still come out worse from having it taxed as income.
    • icebraining 9y ago
      It's not that simple; a company may have a great use for part of their revenue but not for the rest. If a company spends $1 to make $2, but can't simply spend $2 to make $4 (market may be tapped out, or require lowering prices to reach the rest - reducing the average returns), they have to figure out some different way to spend the extra $1, and which you might think they are not good at. In fact, this is easy to see in practice: Apple has tremendous amounts of capital reserves which they are just investing on the market. In fact, $35B of those are in US Treasuries. Is it that absurd to think one can make a better investment than that?
    • walshemj 9y ago
      Depends how you do it and tax treatment an dif your working or not in the UK you can use ISA's to avoid all tax on dividends. Also in the UK you have a separate tax allowance for dividend income. What I also do is stop reinvesting dividends when funds are at a premium to NAV. I have also stopped reinvesting dividends as I think the market will fall this year - I can then buy after the market has fallen. You could also be cute and reinvest your dividend income into a pension and get tax relief back.
• defertoreptar 9y ago
  It's funny you should ask. Buffett has actually said that if a company is not able to find good ways to reinvest their earnings, then it should be issued to owners as dividends. Buffett is actually breaking that rule right now by Berkshire Hathaway having a massive cash balance.
  • tim333 9y ago
    He doesn't have a good way to reinvest just now but probably believes one will turn up. He came out pretty well having a lot of cash in 2008. As a Berkshire shareholder I'd much rather have the cash sitting with Buffett rather than paid to me as a taxable dividend.
• tim333 9y ago
  Capital gains through increasing asset value. Check out the table at the start of the annual letter.