Berkshire Hathaway has never paid a dividend to shareholders.
With Berkshire Hathaway’s Vice Chair Greg Abel set to replace Buffett, many are already speculating about what changes will accompany the transition.
Deploying capital has gotten more difficult at Berkshire Hathaway over the years.
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After an epic 60-year run at the helm of Berkshire Hathaway(NYSE: BRK.A)(NYSE: BRK.B), Warren Buffett surprised investors at Berkshire’s annual meeting by announcing that he plans to step down as CEO of the company at the end of year. He will remain as chairman of the board of directors. Vice Chairman Greg Abel is the successor who will try to fill Buffett’s big shoes. Buffett’s departure from the CEO role will end a superb run that saw Berkshire’s stock widely outperform the broader stock market and turned the Oracle of Omaha into a legend. While Abel and the Berkshire team are expected to continue to follow the playbook that made Berkshire the behemoth it is today, change is inevitable. Berkshire, despite its size and financial resources, has never paid a dividend. Could this soon change?
Buffett has been asked the question plenty of times: Why doesn’t Berkshire pay a dividend? After all, Berkshire generates heaps of cash and paying a dividend could fit in with Berkshire’s brand of being a conservative, steady stock to own that will prudently deploy capital. Additionally, Buffett has purchased plenty of stocks for Berkshire’s portfolio that pay dividends.
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Buffett simply believes there are better ways to deploy capital that will grow the business and better reward shareholders. His three priorities in capital deployment are reinvesting in Berkshire’s businesses, making acquisitions, and repurchasing stock when he thinks Berkshire’s stock is selling at “a meaningful discount to conservatively estimated intrinsic value.”
It’s hard to argue with Buffett’s logic at this point, given that he is viewed as one of the best deployers of capital of all time. Between 1965 and 2024, Berkshire’s stock generated compound annual gains of 19.9%, compared to the S&P 500’s 10.4% including dividends. Overall, Berkshire’s stock appreciated 5,502,284% in that time period, and based on how things are going so far in 2025, that number may soon look better.
It’s quite possible that Berkshire may start paying a dividend once Buffett leaves the CEO role. Given that Buffett is considered arguably the greatest investor of all time, investors will take him at his word when he says he can deploy capital in ways that are more beneficial than paying a dividend. But Abel, despite being a more than capable successor, may not have that same luxury. “A dividend remained out of the question as long as Buffett was running the show because he believed it could be a tool better used by his successors,” said Morningstar’s Berkshire analyst Gregg Warren.
Even before Buffett announced that he would step down, a lot had changed for Berkshire, simply because of how large the company has become. Consider what Buffett wrote in last year’s annual letter to shareholders:
There remain only a handful of companies in this country capable of truly moving the needle at Berkshire, and they have been endlessly picked over by us and by others. Some we can value; some we can’t. And, if we can, they have to be attractively priced. Outside the U.S., there are essentially no candidates that are meaningful options for capital deployment at Berkshire. All in all, we have no possibility of eye-popping performance.
Berkshire can rarely go invest in some small-cap or micro-cap stock that will 10x because it wouldn’t be able to acquire enough shares to even make it worthwhile for the company, which has an equities portfolio valued at nearly $275 billion. It’s become a victim of its own success.
Now, as mentioned above, Buffett prefers to return capital to shareholders through stock repurchases, but management also likes to be cognizant of not buying back stock when the company is valued too high. Lately, that’s been an issue and Berkshire has repurchased far fewer shares in 2024 and the first quarter of 2025 than in prior years.
Particularly this year, Berkshire’s stock has been viewed as a flight to safety, with its diversity of businesses, hoard of cash, and prudent management that has navigated multiple cycles. A dividend would theoretically fit into this theme. Obviously, Abel will want to maintain the same flavor of Berkshire that has driven the stock to incredible gains over six decades, but he’s never going to be Buffett. Some changes are likely and a dividend could eventually be one of them.
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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.
With Warren Buffett Set to Step Down as CEO, Will Berkshire Hathaway Soon Start Paying a Dividend? was originally published by The Motley Fool
