Berkshire Hathaway (NYSE:BRK-A) Doesn’t Believe in Paying Dividends
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It is intriguing that Berkshire Hathaway (NYSE:BRK-A) doesn’t pay any dividends to its shareholders, yet the CEO Warren Buffet is always sniffing for companies with good dividends. When posed with this question, Warren Buffet answered it himself. He pointed out that Berkshire Hathaway (NYSE:BRK-A) haven’t paid any dividends since 1967 and won’t pay it in the future also, yet it enjoys dividends more than anyone else. So what does Berkshire Hathaway (NYSE:BRK-A) do in order to keep its shareholders happy?
Berkshire Hathaway (NYSE:BRK-A)’s 8th top investment is getting dividends from publicly traded companies, which amounts to 85 billion dollars. Berkshire Hathaway (NYSE:BRK-A) makes average dividend extraction of almost 2.5 percent. There are ways the managers can payback money to its shareholders: through dividends, share buybacks, investing in new operations and reinvesting in existing operations. Which of it Buffet employs?
Warren Buffet is one the best in the field, when it comes to allocating capital, which is what, keeps Berkshire Hathaway (NYSE:BRK-A)’s shareholders happy. Berkshire Hathaway (NYSE:BRK-A)’s strategy is that the money earned by the company is invested in other major operations which are capable of yielding large capital. Berkshire Hathaway (NYSE:BRK-A) does that by either investing in that company or by acquiring it. Berkshire Hathaway (NYSE:BRK-A) has been largely successful in its investments and currently holds stake in some of the biggest companies in the world.
Analysts claim that on Berkshire Hathaway (NYSE:BRK-A)’s part it is a great strategy. A company should cater to expansion, improving product line and improving overall business aspects in order to keep the shareholders happy. Investing in other businesses, especially those which generate large capital can be far better than paying dividends right out of your profits. Berkshire Hathaway (NYSE:BRK-A) has been smart enough to keep its shareholders waiting a bit, but not long enough to hear them complain but just as long to reward them loads of cash.
Berkshire Hathaway (NYSE:BRK-A)’s CEO Warren Buffet has been true to his word, stating that the company emphasizes on investments and reinvestments because it believes that upfront dividends aren’t that big as compared to the money generated from these investments. Still, Buffet believes that for any company it has to have a way to payback its shareholders; those are the reasons why Berkshire Hathaway (NYSE: BRK-A) only does business with a company that has great dividends.
Berkshire Hathaway (NYSE:BRK-A)’s share continuously grows, leaving the investors with no chance to complain whatsoever. Berkshire Hathaway (NYSE:BRK-A) also revealed that the company’s stock would have been in jeopardy had they been relying on paying mere dividends to its shareholders.
Buffet has come a long way in the financial world. Nobody understands the business better than him. Berkshire Hathaway (NYSE:BRK-A) is his kingdom; he knows how to run it and he knows which company to shake hands with. And just like a king, Buffet is aware that he should make his subjects happy from time to time and award them perks to keep them interested in the companies, if he wants their loyalty.