Key Factors
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Berkshire final issued a dividend in 1967, deciding since then to focus primarily on reinvesting its earnings.
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As Warren Buffett has handed the torch to Greg Abel, Berkshire has continued with this strategy.
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Below Abel, Berkshire has additionally resumed share repurchases, choosing this extra tax-efficient strategy.
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Warren Buffett gained management of Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB) in 1965 and ran it as his primary funding car till his retirement in 2025. Throughout his 60-year tenure as CEO, Berkshire’s shares gained in worth by a mean of 19.9% yearly, an unimaginable compounding observe report.
However throughout this time-frame, Berkshire Hathaway has paid a dividend simply as soon as: a $0.10-per-share money distribution in 1967. The holding firm’s reluctance to pay out dividends is essential to its success story. Though Berkshire, notably in newer years, has repurchased its personal shares, since Buffett’s 1965 takeover, its focus has been on reinvesting its earnings and funding beneficial properties into new investments and acquisitions.
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Whereas Greg Abel took over as CEO in January 2026, ushering in a brand new period for Berkshire, do not assume these capital priorities are about to alter.
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Not paying dividends is a component and parcel of Berkshire’s success
As Abel famous in his first letter to Berkshire Hathaway shareholders, “Our strategy to money dividends continues to be that Berkshire is not going to pay dividends as long as greater than a greenback of market worth for shareholders in all fairness more likely to be created by every greenback of retained earnings.”
In different phrases, Berkshire Hathaway seems to stay devoted to Buffett’s strategy, the very strategy that turned this former textile firm into one of many world’s largest conglomerates. Thus far this 12 months, Abel has demonstrated that Berkshire remains to be within the enterprise of deploying its capital into new acquisitions and investments.
As an example, on July 24, Berkshire Hathaway accomplished its $8.5 billion acquisition of homebuilder Taylor Morrison. Additionally, this 12 months, beneath Abel’s management, the corporate has elevated its fairness stake in Alphabet. Throughout Q2, Berkshire elevated its place by $17 billion, $10 billion of which got here from its non-public placement funding in newly issued Alphabet shares.
Share repurchases stay a secondary choice
Solely time will inform whether or not these Abel-led acquisitions and investments will carry out in addition to, if not higher than, the Warren Buffett investments within the Berkshire portfolio. Whereas reinvesting money circulate and capital into new investments stays Berkshire Hathaway’s primary focus, that is not its solely use for extra capital.
Secondary to Berkshire’s confidence in its means to reinvest its capital, the corporate has additionally traditionally shunned issuing dividends resulting from their tax inefficiency. Money dividends are taxable, however share buybacks, which obtain the identical goal of returning capital to buyers, are solely taxable to those that promote their shares.
Abel has resumed buybacks since taking the helm. Berkshire maintains the identical buyback coverage as earlier than, opting to solely repurchase shares when it is “conservatively decided” by administration that the inventory trades beneath intrinsic worth. Berkshire purchased again simply $235 million in shares throughout Q1 2026, however since April has accelerated repurchases, shopping for again $4.5 billion in Q2 and a further $3.5 billion since then.
Based mostly on latest exercise, Abel seems to be balancing between new investments and repurchases. Whereas not sure, this strategy could proceed, particularly since over $350 billion out of Berkshire’s $1.26 trillion in whole belongings stay in money and money equivalents. Berkshire Hathaway should still not be one of many high dividend shares, however Abel is arguably sticking to the strategy that made it a profitable long-term funding.
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Thomas Niel has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Alphabet and Berkshire Hathaway. The Motley Idiot has a disclosure coverage.
