A:

Berkshire Hathaway (BRK-A, BRK-B) does not pay a dividend because its chairman and CEO, Warren Buffett, believes it is more beneficial to allocate the company's earnings in other ways. In particular, Buffett prefers to reinvest profits in things that allow his company to improve its efficiency, expand its reach, create new products and services as well as improve existing ones, and further separate itself from competitors. Buffett, like many business leaders, feels that investing back into his business provides more long-term value to shareholders than paying them directly because the company's financial success rewards shareholders with higher stock values. Additionally, Berkshire Hathaway maintains an aggressive stock buyback policy that puts cash directly into shareholders' pockets.

Despite the company having billions of dollars of cash on hand, the prospect of a Berkshire Hathaway dividend is dim as long as Buffett is in charge. The company has paid only one dividend during his reign, in 1967, and Buffett later joked he must have been in the bathroom when the decision was made. 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 stock price increased by almost 700,000% between 1964 and 2014 and specifically experienced a recent uptick in the months of November and December 2016. Someone who invested $1,000 in the company's stock in 1980 is a millionaire in 2016.

As for the stock buybacks, these benefit investors in two ways—they allow them to cash in some or all of their company stock at a premium they would not receive on the open market. The remaining shareholders also increase their ownership stake as stock buybacks reduce the total number of outstanding shares.

RELATED FAQS
  1. How does the "Buffett Premium" increase Berkshire Hathaway's stock price?

    Explore the theory that Berkshire Hathaway stock carries a Warren "Buffet Premium" that would disappear upon his death and ... Read Answer >>
  2. Why doesn't Warren Buffett split Berkshire Hathaway stock?

    Understand Warren Buffet's fundamental approach to investing and learn why his basic investment strategy explains his no-split ... Read Answer >>
  3. What was the worst investment Warren Buffett made in his career?

    Discover what Warren Buffett's surprising answer is to the question of what was the single worst investment that the "oracle ... Read Answer >>
  4. What is Warren Buffett's annual salary at Berkshire Hathaway?

    Learn more about how much Warren Buffett receives in salary and how he continues to stay involved with his company and his ... Read Answer >>
  5. Does the massive size of Berkshire Hathaway reduce its future returns?

    Find out why Warren Buffett's holding company, Berkshire Hathaway, may eventually grow so large that it may struggle to maintain ... Read Answer >>
  6. What's the most expensive stock of all time?

    The most expensive publicly traded stock of all time is Warren Buffett’s Berkshire Hathaway. Read Answer >>
Related Articles
  1. Retirement

    Is Berkshire Hathaway Stock Suitable for Your IRA or Roth IRA? (BRK.B, BRK.A)

    Discover how Warren Buffett's Berkshire Hathaway is structured and if the company is appropriate for individual retirement accounts.
  2. Investing

    Berkshire Hathaway Reports Massive Earnings

    Berkshire Hathaway reported another massive jump in earnings and book value growth, leading Buffett to address the company's buyback plans.
  3. Insights

    Who is Driving Berkshire Hathaway's Management Team? (BRK.B)

    A look into Berkshire Hathaway’s core management team and how they work together to deliver consistent returns over the long term.
  4. Investing

    Always Bet On Berkshire Hathaway (And Here's Why)

    With its share price at an all-time high amid talk of a stock market correction, why would anyone buy Berkshire Hathaway shares?
  5. Financial Advisor

    Berkshire Hathaway's 4 Most Profitable Lines of Business (BRK-A, BRK-B)

    Learn about Warren Buffett and his company Berkshire Hathaway. Understand why the four companies listed are his most important and profitable lines of business.
  6. Investing

    Where Does Warren Buffett Keep His Money?

    Understand who Warren Buffett is and how he made most of his net worth. Learn about the main places and investment vehicles where Buffett keeps his money.
  7. Investing

    What Will Become of Berkshire Hathaway Beyond Buffett?

    Warren Buffett, who has become almost synonymous with the term “investor,” remains robust, but at 83 is clearly somewhere in the fourth quarter of the game. What does that mean for Berkshire ...
  8. Investing

    Why Hedge Fund Managers are Loving Buffett

    Berkshire Hathaway was a favorite among hedge fund managers last year. What is the draw at this particular point in time?
  9. Investing

    Berkshire's Record Cash Guarantees More Deals (BRK-B)

    Warren Buffett's Berkshire Hathaway is sitting on more than $70 billion in cash, almost guaranteeing what will happen next: more big acquisitions.
  10. Insights

    Buffett's Berkshire Hathaway Retains S&P Rating

    Warren Buffett's Berkshire Hathaway manages to retain its S&P rating after taking on $10 billion in debt.
RELATED TERMS
  1. Berkshire Hathaway

    A holding company for a multitude of businesses run by Chairman ...
  2. Baby Berkshire

    Baby Berkshire refers to the 50:1 stock split after the market ...
  3. Dividend

    A distribution of a portion of a company's earnings, decided ...
  4. Holdings

    The contents of an investment portfolio held by an individual ...
  5. Accumulating Shares

    Common stock given to current shareholders of a company in place ...
  6. Cash-And-Stock Dividend

    A corporation distributing earnings to its shareholders as both ...
Trading Center