When Warren Buffett writes to his shareholders next year, he said Monday, he may lay out a “logical dividend policy” on when a business should pay a dividend to its shareholders.
But the policy also would include when a business should not pay a dividend, even if some shareholders ask for one, said Buffett, who has been firmly opposed to paying a dividend at Berkshire Hathaway Inc., the Omaha investment company that Buffett heads.
In interviews with CNBC and Fox Business Monday following up on his meeting Saturday with Berkshire shareholders, Buffett talked about dividends and made a wide range of other comments, including:
>>Berkshire bought about $60 million worth of stocks in companies that it already owns on Friday and planned to buy more Monday, especially since the price of many stocks dropped after controversial election results in Europe.
>>Nebraska Furniture Mart sold $35 million worth of goods in the past week thanks to shareholder purchases, about a 10 percent increase over last year and an indication that consumers are spending. Buffett sold jewelry as fast as he could for 2¼ hours at Borsheims Sunday. “Crazy Warren was in the zone,” he said.
>> The person designated by Berkshire's directors as a successor to Buffett is a male, although Buffett did not identify him.
>> Investors should not adopt a lifestyle that requires a certain profit from investing. Rather, invest wisely and learn to live on the profit you get.
>> Leaders of both U.S. political parties agree privately that they should cut expenditures and raise tax revenue at the same time, but neither side is willing to be the first to try to take both actions for fear of losing the November election. The looming expiration of the so-called Bush tax exemptions may trigger a post-election agreement, however.
>> Elections of a Socialist president in France and a divided parliament in Greece were the logical result of voters being asked to vote in favor of painful austerity measures. Europe will solve its problems eventually through a “messy process” that may well take several years.
>> His goal for Berkshire is to provide “modestly better” returns than average for shareholders. Because of its size, the company won't have the extraordinary returns of the past. Investors can find companies with better returns if they can determine their value and growth potential.
>> Princess Diana, at a dinner party shortly before she was killed in an auto wreck, remarked that she had just been to the White House and added, “Bill Clinton is the sexiest man alive.” Buffett was sitting across the dinner table from her at the time.
Buffett's aversion to dividends has been a basic theme for decades because he believes he can earn more for his shareholders by putting the money to use within Berkshire than by paying it to them. The company's cash hoard — currently more than $30 billion, with at least $20 billion as a permanent base — gives Buffett the freedom to make almost any investment he wants while keeping the company's credit rating high.
But Berkshire's stock price has been relatively flat for several years, prompting several questions at Saturday's meeting, such as this one asked by a shareholder: I own the stock to make money and its per-share price isn't growing, so why not pay a dividend?
From questions at the meeting, Buffett said Monday, “You learn what's on the shareholders' minds.” Although he has written about his ideas on paying dividends in the past, he said, he may not have explained it well enough and should write about it again.
“Someday Berkshire will pay a dividend because it will get so large that we can’t use all the money we earn effectively, although we don’t think we are at that point,” Buffett said on Fox.
Buffett said a company should consider paying a dividend if, over time, it can't generate more than $1 of value for each $1 of cash it has. Cash loses value to inflation, he said, so it should be invested in good businesses that will make money over the long term.
Apple Computer, for example, recently reported $110 billion in cash and long-term securities and, Buffett said, has little chance of making a large acquisition. Buffett said that in his view, Apple is acting properly when it said it plans to pay a dividend later this year.
Because Buffett's main job finding ways to use Berkshire's cash to buy companies or make profitable investments, paying a dividend would mean he has failed to find better places to use that money than paying dividends.
A company should not pay dividends, Buffett has said, just to attract investors or at a time when it could put the money to more profitable long-term use within the company or with good acquisitions.
The CNBC interview took place in the Hollywood Diner, located along Abbott Drive in Carter Lake. Buffett explained how that piece of Iowa ended up on the west side of the Missouri River when it changed course. Carter Lake Mayor Russ Kramer was present during part of the program and said it was good for the community to have its name repeated frequently during the broadcast.
Buffett had mentioned Saturday that Berkshire recently tried but failed to buy a company for about $22 billion. He said Monday that he “couldn't come to terms” with the company but again did not identify it. He said the deal could come up again, like asking a girl for a date a second time after she turned you down the first time.
He said people who invest in gold are right about their belief that currency loses its value over time. But they “run” from currency in the wrong direction, he said, buying a non-productive asset rather than investing in a productive asset such as farm land or a good business that will generate wealth.
His dislike of gold as an investment has drawn sharp criticism from gold advocates, and Buffett said the reaction has been strong because people who own gold “want people to be as afraid as they are” so that the price per ounce keeps increasing.
Buffett said people should not pay attention to the news of the day when making investments but rather look for good companies with lasting value. “I think the worst mistake you can make on stocks is to buy or sell based on current headlines.”
Of the dinner with Princess Diana, Buffett said she was sitting between Barry Diller, the creator of Fox Broadcasting, and Theodore “Teddy” Forstmann, a private equity fund founder. He said they both appeared shocked when she made the remark about President Clinton.
“They thought they were scoring big-time,” Buffett said.
The Omaha World-Herald Co. is owned by Berkshire Hathaway Inc.
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