Investors have been debating the dividend question for decades. So far, shareholders have been well served by Warren Buffett's reluctance to send out dividend checks.
My sense is that a dividend is highly unlikely during Warren’s lifetime: he doesn’t need the money, and a dividend would result in unnecessary taxes, which would reduce the amount ultimately intended to go to charities. My further sense is that Berkshire, with Warren’s planning, has several things up its sleeve that would be superior to a dividend. Top of the list would be the distribution of appreciated securities, like Coke or Amex, to shareholders, which would transfer the related deferred tax to shareholders, who would have the choice to hold or sell.
Distributing shares in kind is a very interesting idea that I’ve come across in the past. Assuming the shares are held outside the insurance subsidiaries, or allowed to be moved from the insurance subsidiaries to the holding company, this could be a tax efficient way to deal with distribution of capital. Some time ago, BNSF was moved from National Indemnity to the holding company level so it seems like doing this sort of thing is allowed by regulators as long as sufficient capital remains within the insurance subsidiaries.
Ravi, you alerted me to the transfer of BNSF from National Indemnity, and it raised a big suspicion that this is one of Warren’s preparations for life after. We might be pleasantly surprised by how thoughtful he has been. A cash dividend is surely at the bottom of the list.
My sense is that a dividend is highly unlikely during Warren’s lifetime: he doesn’t need the money, and a dividend would result in unnecessary taxes, which would reduce the amount ultimately intended to go to charities. My further sense is that Berkshire, with Warren’s planning, has several things up its sleeve that would be superior to a dividend. Top of the list would be the distribution of appreciated securities, like Coke or Amex, to shareholders, which would transfer the related deferred tax to shareholders, who would have the choice to hold or sell.
Distributing shares in kind is a very interesting idea that I’ve come across in the past. Assuming the shares are held outside the insurance subsidiaries, or allowed to be moved from the insurance subsidiaries to the holding company, this could be a tax efficient way to deal with distribution of capital. Some time ago, BNSF was moved from National Indemnity to the holding company level so it seems like doing this sort of thing is allowed by regulators as long as sufficient capital remains within the insurance subsidiaries.
Ravi, you alerted me to the transfer of BNSF from National Indemnity, and it raised a big suspicion that this is one of Warren’s preparations for life after. We might be pleasantly surprised by how thoughtful he has been. A cash dividend is surely at the bottom of the list.