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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Jurgis Bekepuris who wrote (33404)	2/2/2009 12:37:27 AM
From: Mark Marcellus	2 Recommendations Read Replies (1) \| Respond to of 78740

It's late, and it's probably not important to this thread (to each their own and all that) so I'll try not to beat this to death but... that is a mostly inaccurate representation of what Buffett has said. Buffett is not particular about how a company is going to go about giving him his return on capital, he just cares how high that return is. In fact to say: As you may know Buffett never bought a stock for dividends (bonds and preferreds don't count) is nonsensical. Why the artificial distinction between bonds and preferreds vs. stocks? To Buffett it's all the same thing - he's looking at the future income stream. Now, let's look at his investments. First, there's all the companies he's bought which are not reinvesting most of their profits but instead sending them back to BRK - what is that if not a form of dividend? Then off the top of my head, some of his major public holdings: KO, AXP, WFC, WTM, BNI, KFT, WPO These all pay a dividend. The germ of truth in what you're saying is that Buffett has a strong preference for companies who can consistently reinvest their earnings in their business at a high rate of return. These rare companies should not be paying dividends because they can get a higher return on capital for their owners by keeping the money. That is a far cry from saying dividends don't matter.

To: Jurgis Bekepuris who wrote (33404)	2/2/2009 12:41:58 AM
From: Spekulatius	Read Replies (1) \| Respond to of 78740

re Dividends - I like dividends too. While I like to see money reinvested at a good return the question really is if most companies are able to do so. Instead they blow it on acquisitions or buy back stock, usually when it is overpriced. A dividend instills much needed discipline in many cases, IMO. There may be exceptions from this rule (BRK is one) or company in hypergrowth mode should certainly not do a payout but if we look for a company like CSCO, I think they should pay a dividend.

To: Jurgis Bekepuris who wrote (33404)	2/2/2009 1:25:33 PM
From: E_K_S	Read Replies (2) \| Respond to of 78740

Companies that pay dividends may not be a specific metric that Warren Buffet uses to screen investment opportunities but may signal candidate stocks that meet his other key investment criteria. Friday, October 31, 2008 Warren Buffett – The Ultimate Dividend Investor dividendgrowthinvestor.com From the article:"...Most companies that have managed to increase their dividends for long periods of time are ones that have wide moats as well as excellent competitive advantages in the marketplace. Having these qualities leads to rising earnings which tend to support a steady pace of increase in dividends...." According to the article (10/2008), 86% of the companies in BRK-A paid some type of dividend. 12 companies are dividend aristocrats, one is a dividend champion and three are dividend achievers. ================================================================ I do know from my current portfolio asset allocation, I am currently moving some bond money (yielding less than 1%) into dividend "aristocrat" type equities that yield over 3% so I can lock in a better than bond yield and get a Buffet type value bargain. I do agree with you that buying equities based on dividend yields alone (especially when treasury rates are much higher) is not a very useful metric for screening undervalued stocks. However with current T-bill rates so low (<1%) it is one factor I am now using with other standard value measurements to screen possible new buys. EKS