Buffett: Berkshire could pay dividend
By Alistair Barr, MarketWatch
OMAHA, Neb. (MarketWatch) -- Berkshire Hathaway could pay a dividend if the company can't generate enough returns from its pile of cash over the next few years, Chairman Warren Buffett said Saturday at his annual shareholders' meeting.
A dividend payment would be a significant strategic shift for the holding company. Buffett has resisted payouts because dividends used to be taxed heavily, and he was confident that he could make more money by investing Berkshire's money himself.
However, taxes on dividends have been cut. Berkshire also has struggled to find acquisitions in recent years, leaving it with more than $43 billion in cash and cash equivalents at the end of 2004.
"If, in a couple of years, we aren't producing more than a dollar's worth of market value from each dollar we retain, then we should have a dividend," Buffett said at Berkshire's annual shareholders' meeting in Omaha, Neb.
The issue of a future dividend will be discussed at an upcoming Berkshire directors' meeting, he added.
"When cash piles up like it currently has, it's pretty dumb to hold billions of dollars" with interest rates so low, Buffett said. "The burden of proof will shift to us if within a few years we can't use a lot of our money intelligently."
Vere Gaynor, a portfolio manager at Bahl & Gaynor, said on Wednesday before the Berkshire meeting that Buffett should consider paying a dividend because of all the cash the company is sitting on.
"The value of a company is basically the present value of future dividends," Gaynor said Wednesday. "So that's the question I would ask him."
Gaynor helps run a fund that mainly invests in companies that pay and increase dividends. He also holds a small stake in Berkshire Hathaway.
Microsoft Corp., bowing to demands that it share some of its huge cash hoard with investors, paid a one-time dividend of $3 a share late last year. Until then, the software giant hadn't paid a dividend.
Weeks later, Microsoft co-founder Bill Gates was named as a Berkshire director, replacing Buffett's wife Susan, who passed away in July.
Alistair Barr is a reporter for MarketWatch in San Francisco. |
