Buffett did not buy KO, AXP, WFC, WTM, BNI, KFT, WPO for dividends. The fact that they pay dividends is irrelevant to him.
So if they decide to cut the dividend so they can invest in a business with, say, a negative ROIC, that is unimportant to him?
there is no medium. Either pay out all, or reinvest. Buffett is 100% reinvestor. His cash cows are 100% payouters
Not true. His businesses are allowed to reinvest the portion of their earnings, even if it's all of their earnings, that will provide a good return. He wants the same thing with the public companies. It is very possible, even common, that some portion of a company's earnings can be reinvested in the business at a good rate of return, but that there are excess earnings that are better allocated to dividends or buybacks. The quality of the company's decision in this area is most certainly important to Buffett. Future earnings that are going to be invested at a sub par return are definitely inferior to future earnings that will be returned to him in the form of a dividend.
if you don't understand the difference between bond and stock, we should stop talking right here.
I certainly understand the difference between stocks and bonds but agree that we should stop talking right here. |
