Inside Berkshire’s Dividend and Capital Returns Policies and Future Managers
Dividends and repurchases
Berkshire Hathaway (BRK.B) has stuck to Warren Buffett’s policy of no dividends or repurchases since the beginning of its operations. Buffett’s investment style and its better performance than the broader index (SPY) (SPX-INDEX) have resulted in a huge conglomerate, generating huge cash flows every quarter.
Berkshire managed operating cash flows of $26.6 billion in the first half of 2017, compared with $15.3 billion in the 2Q16. The company is sitting on cash of almost $100 billion, with few acquisition options in and outside of the US to deploy huge amounts at lower valuations.
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Given Buffett’s style of investing, the company may not find good investment opportunities over the longer term, though it could consider more buybacks, after its first-ever announcement of a buyback in 2011.
A lot will also depend upon how future managers like Todd Combs or Ted Weschler consider buybacks and dividend options for the company. Berkshire’s filing doesn’t disclose the name of managers alongside investments made. Notably, asset managers like BlackRock (BLK), Blackstone (BX) are always looking to attract talented asset managers to manage higher returns and invite more limited partners and funds.
Berkshire’s total assets on June 30, 2017, stood at $665.6 billion, compared with $620.9 billion as on December 31, 2016, driven by its improved insurance business, the appreciation of its holdings, and the generation of cash from existing holdings.