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Should Berkshire Pay a Dividend?

Buffett authors weigh in on the possibility and wisdom of Berkshire Hathaway returning capital to shareholders.

Jeremy Glaser: For Morningstar, I am Jeremy Glaser. I am here at the 2012 Value Investor Conference in Omaha, Neb., ahead of the Berkshire Hathaway Annual Meeting. We've talked to several Warren Buffett authors today, and one of the things on many people's minds was will Berkshire Hathaway ever pay a dividend. The firm has instituted share buybacks, but so far Warren Buffett seems very reluctant to actually write that check every quarter to shareholders. So, will he be issuing a dividend anytime soon?

Jeff Matthews: I don't think he is going to want to talk about a dividend. It sort of represents failure of the basic idea, the basic premise of Berkshire Hathaway which is that he can invest better than his shareholders, and that's true. So, I don't see any change until he is not in the picture.

Glen Arnold: I think it's somewhat of an illusion the amount of cash that he's got. You may think it's extraordinarily large, but it's not really because of the insurance operations. You need to keep a large amount of money, at least $20 billion in the case of Berkshire Hathaway, in cash to make sure you got enough cash to pay out on insurance. So, that's a safety device. The additional cash beyond that $20 billion is for potential investments, and when one comes along, I'm sure Buffett will pounce. I'm sure he will use that money rather than payout a dividend. His appetite for finding bargains is still undiminished.

Robert Hagstrom: Well, you can never say never, right, because he never said he would buy a technology company, but [now Berkshire owns shares of] IBM. So, I can't rule it out. I would think not, though. I would think that he is still would want the opportunity to spend that money and to be able to buy a business. That's his first preference, is to buy a business. That's what he wants to do. So, I wouldn't think the dividend would come immediately. I would expect more share-repurchase opportunities before I would the dividend, particularly at the stock price level.

Adam Brownlee: He is always looking for good businesses to invest in. So, the question becomes, is he going to run out of good investments that deliver a great rate of return? It still seems like he's out there finding businesses to invest in. [The purchase of IBM shares] is not that recent, but I think he is still out there finding good deals. So, I don't foresee a dividend coming soon. I think he's going to continue to find things to buy, and that's what we're going to keep seeing for the short term.

Robert Miles: Jeremy, I don't think [Buffett will pay a dividend] in his lifetime because he is the greatest capital allocator of all time. So, by him returning capital to his investors or shareholders, it's saying in effect "You can allocate capital better than I can." So, I don't think that will happen in his lifetime. I do, however, think that after he passes away--hopefully [it won't be for] another 20 or 30 years--that Berkshire Hathaway may look a little bit more like GE and begin to pay a dividend.

Jeremy Glaser does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.