Why Doesn’t Berkshire Hathaway Pay a Dividend? (2024)

In its 2022 annual report, Berkshire Hathaway (BRK.A, BRK.B) reported a net loss of $-22.8 billion and a $125 billion cash pile.

Once again, the question will be asked: Why doesn’t Berkshire Hathaway pay a dividend to its shareholders?

The short answer is that company founder and CEO Warren Buffett believes that money can be better spent in other ways.

Key Takeaways

  • Berkshire Hathaway is a large, diversified holding company led by renowned investor Warren Buffett that invests in the insurance, private equity, real estate, food, apparel, and utilities sectors.
  • Despite being a large, mature, and stable company, Berkshire Hathaway does not pay dividends to its investors.
  • Instead, the company chooses to reinvest retained earnings into new projects, investments, and acquisitions.

Reinvesting Is Top Priority

In particular, Buffett prefers to reinvest profits in the companies he controls to improve their efficiency, expand their reach, create new products and services, and improve existing ones.

BRK.A shares have a five-year annualized return of 10.81%, while BRK.B shares have returned 10.67% per year over the same period, as of August 2023. There can be minor differences between the two Berkshire Hathaway share classes due to market dynamics and differing pools of investors.

Like many business leaders, Buffett feels that investing back into the business provides more long-term value to shareholdersthan paying them directly because the company’s financial success rewards shareholders with higher stock values.

The prospect of a Berkshire Hathaway dividend is dim as long as Buffett is in charge. The company has paid only one dividend, in 1967, and Buffett later joked that he must have been in the bathroom when the decision was made.

Other Priorities

In fact, Buffett has said that he has three priorities for using cash that is ahead of any dividend: reinvesting in the businesses, making new acquisitions, and buying back stock when he feels that it is selling at “a meaningful discount to conservatively estimated intrinsic value.” (Berkshire Hathaway purchased $27.1 billion of its own shares in 2021.)

Nevertheless, statistics give credence to Buffett’s stance that using profits to buttress the company’s financial position results in greater wealth for shareholders than paying dividends. Berkshire Hathaway’s BRK-A increased by 3,787,464% from 1965 to 2022, compared to the S&P 500, which returned 24,708% over the same period.

In 2019 and 2020, the stock lagged behind the . But in 2021, its Class A shares outperformed the index by 0.9 percentage points, closing up 29.6% on the year. In 2022, the stock continued to outperform the S&P 500, as Berkshire had a 4.0% increase, while the S&P declined 18.1%, its worst annual return since the Great Recession.

Of course, Greg Abel, recently announced to be Buffett’s successor, might have different thoughts about paying dividends.

On May 1, 2021, Berkshire Hathaway Vice Chairman Charlie Munger unofficially announced that Warren Buffett would be succeeded as chief executive officer (CEO) by Greg Abel when Buffett eventually steps down. Abel is CEO of Berkshire Hathaway Energy and vice chairman in charge of noninsurance operations.

Prospects for Acquisitions

It’s tough to argue with success like that, but some shareholders do. It has been argued that a small portion of the enormous amount of cash on hand could well be devoted to making shareholders even happier.

There is speculation, of course, that Buffett is preparing for more major acquisitions. In March 2022, Berkshire Hathaway announced that it had agreed to buy insurance company Alleghany Corp. (Y) for $11.6 billion, its first takeover since acquiring aircraft and industrial parts maker Precision Castparts Corp. in 2015.

Why Doesn’t Berkshire Hathaway Pay its Shareholders a Dividend?

Company founder and CEO Warren Buffett believes profits can generate better shareholder value spent in other ways. He frequently shares these views during Berkshire's annual meetings.

What Does Berkshire Hathaway Do With Detained Earnings?

As an alternative to paying dividends, the company chooses to reinvest profits into new projects, investments, share buybacks, and acquisitions.

Has Not Paying a Dividend Paid Off for Investors From a Share Price Perspective?

Berkshire Hathaway’s flagship BRK.A shares have increased by 3,787,464% from 1965 to 2022 compared to the S&P 500 returning 24,708% over the same period.

What Are the Prospects of Berkshire Hathaway Paying a Dividend in the Future?

Going from Buffett’s past history, it’s unlikely that the company will pay investors a dividend while he remains in charge. There’s every chance that Berkshire Hathaway’s future CEO also decides against paying dividends, especially given Buffett’s track record of creating shareholder value by other means.

The Bottom Line

In one of his famous letters to shareholders, Buffett said that perhaps Berkshire Hathaway might institute a dividend 10 or 20 years down the road. This was in 2018, when Buffett was 88. Unless he really is immortal, this suggests that his answer to dividends for shareholders remains a firm “no.”

Correction—Feb. 8, 2024: This article has been corrected to state that the S&P 500 had a negative annual return in 2022.

Why Doesn’t Berkshire Hathaway Pay a Dividend? (2024)


Why Doesn’t Berkshire Hathaway Pay a Dividend? ›

Like many business leaders, Buffett feels that investing back into the business provides more long-term value to shareholders than paying them directly because the company's financial success rewards shareholders with higher stock values.

Why doesn't Berkshire Hathaway pay dividends? ›

Since Buffett took over the company, shares have risen in value by an average of nearly 20% per year, roughly double the rate of the S&P 500. This is the main reason Buffett hasn't authorized another dividend: He believes investors are simply better off having him and his team invest the capital.

Has Berkshire Hathaway ever paid a special dividend? ›

The only time Berkshire ever paid a dividend was in 1967. The payout was $0.10 per share. At the time, Berkshire had only one share class. "It was a terrible mistake," Buffet later conceded.

What are the cons of Berkshire Hathaway? ›

Berkshire Hathaway doesn't pay dividends

In the comparison to the S&P 500 Index above, the performance figures include reinvested dividends. That is a benefit for the S&P 500, but has no impact on Berkshire Hathaway's performance because the company doesn't pay a dividend.

How much does Berkshire receive in dividends? ›

Berkshire Hathaway is on pace to collect around $6 billion in dividend income this year. More than three-quarters of it will come from six core holdings.

Why should I not invest in Berkshire Hathaway? ›

It's all about the stock

So there's no reason to expect a dividend to be paid anytime soon, given the level of control and ownership Buffett has at the company. Thus, if you are an investor trying to live off the income you can generate from your portfolio, then Berkshire Hathaway would be a bad option for you.

Why is Berkshire Hathaway losing money? ›

The decline was mostly due to a drop-off in the paper value of its holdings, and Buffett encouraged investors to look instead at the company's operating earnings, which exclude its investments. The company's operating earnings skyrocketed 39% year over year, coming in at about $11.2 billion.

What is the best dividend stock according to Warren Buffett? ›

3 Stocks With High Dividend Yields That Warren Buffett Likes
  • Chevron Corp. (CVX)
  • Berkshire Hathaway Inc Class A. (BRK.A)
  • Coca-Cola Co. (KO)
  • Berkshire Hathaway Inc Class B. (BRK.B)
  • Citigroup Inc. (C)
May 6, 2024

Will brk b ever pay dividends? ›

Going from Buffett's past history, it's unlikely that the company will pay investors a dividend while he remains in charge. There's every chance that Berkshire Hathaway's future CEO also decides against paying dividends, especially given Buffett's track record of creating shareholder value by other means.

What is the 20 year return on Berkshire Hathaway? ›

But—and here's the kicker—from 2003 to 2022, a period of 20 years, the S&P 500 delivered a 9.80% compounded annual return while Berkshire came in lower at 9.75%.

What was Berkshire Hathaway's biggest mistake? ›

Buffett has turned that failing textile business into a massive conglomerate. Berkshire no longer deals in textiles, with Buffett giving up that particular fight in 1985. Sticking with the textile business may have been one of Buffett's biggest mistakes as CEO of Berkshire Hathaway.

Should I invest in Berkshire Hathaway A or B? ›

Key Takeaways. Berkshire Hathaway Class A is the company's original stock offering, known for its stratospheric price per share. Berkshire Hathaway Class B shares, first issued in 1996, are more modestly priced and have a correspondingly modest share of equity value in the company.

Should I invest in Berkshire Hathaway or S&P 500? ›

Historical Performance. Berkshire Hathaway: Has historically outperformed the S&P 500 over the long term under Warren Buffett's leadership. However, past performance doesn't guarantee future results.

Who is the best dividend investor of all time? ›

Warren Buffett is widely considered the greatest investor of all time, and much of his investment strategy relies on collecting dividend payments.

What stock pays the highest dividend? ›

10 Best Dividend Stocks to Buy
  • Verizon Communications VZ.
  • Johnson & Johnson JNJ.
  • Altria Group MO.
  • Comcast CMCSA.
  • Medtronic MDT.
  • Duke Energy DUK.
  • PNC Financial Services PNC.
  • Kinder Morgan KMI.
May 3, 2024

How much does Warren Buffett make from Coca-Cola dividends? ›

A massive passive income stream

Berkshire currently owns 400 million shares of Coca-Cola. This means that on an annualized basis, Warren Buffett's company generates $736 million in dividend income from the beverage giant. That is a huge passive income stream that likely explains why Buffett isn't exiting the position.

Why own a stock that doesn't pay dividends? ›

Companies that offer dividends provide investors with a regular income as the stock price moves up and down in the market. Companies that don't offer dividends are typically reinvesting revenues into the growth of the company itself, which can eventually lead to greater increases in share price and value for investors.

Why would you own a stock that doesn't pay dividends? ›

Thus, investors who buy stocks that do not pay dividends prefer to see these companies reinvest their earnings to fund other projects. They hope these internal investments will yield higher returns via a rising stock price. Smaller companies are more likely to pursue these strategies.

Does Warren Buffett own any dividend stocks? ›

He believes his investments are rewarded when the companies he has invested in increase dividends and focus on shareholder returns. But Coca Cola and American Express aren't the only two dividend-paying stocks in Buffett's portfolio.

Which big stocks don t pay dividends? ›

Popular Stocks That Don't Pay Dividends
  • Berkshire Hathaway. Berkshire Hathaway (BRK. ...
  • Alphabet. The second stock on this list is Alphabet (GOOG, GOOGL). ...
  • Amazon. The next major tech stock on this list is Amazon. ...
  • Tesla. ...
  • Netflix. ...
  • PayPal. ...
  • Advanced Micro Devices. ...
  • Monster.
Feb 16, 2024

Top Articles
Latest Posts
Article information

Author: Rob Wisoky

Last Updated:

Views: 5841

Rating: 4.8 / 5 (68 voted)

Reviews: 83% of readers found this page helpful

Author information

Name: Rob Wisoky

Birthday: 1994-09-30

Address: 5789 Michel Vista, West Domenic, OR 80464-9452

Phone: +97313824072371

Job: Education Orchestrator

Hobby: Lockpicking, Crocheting, Baton twirling, Video gaming, Jogging, Whittling, Model building

Introduction: My name is Rob Wisoky, I am a smiling, helpful, encouraging, zealous, energetic, faithful, fantastic person who loves writing and wants to share my knowledge and understanding with you.