I have heard it repeated over and over again that dividends don’t matter to Warren Buffett, and therefore, should not play any meaningful role in how other investors arrange their personal affairs. This type of conclusion is based on the superficial fact that Warren Buffett prevents Berkshire Hathaway (BRK.B) from paying a regular dividend to its shareholders.
That conclusion is a bit off because it ignores Warren Buffett’s own history, his current personal circumstances, and the current incentives that he has offered for executives of Berkshire’s subsidiaries.
To understand Buffett’s own history, check out pages 338 and 339 from Alice Schroeder’s “Snowball” biography of Buffett which contains the following quote:
“As 1974 began, stocks for which he had recently paid $50 million lost a quarter of their value. Berkshire, too, slid down to $64 per share. Some of the former partners began to fear it had been a mistake to … Read the rest of this article!