In today’s Barron’s, Andrew Bary presents the bullish case for Berkshire Hathaway and speculates that Warren Buffett may soon be willing to part with some of Berkshire’s growing cash hoard by paying a dividend to shareholders, perhaps as soon as later this year. Mr. Bary believes that Berkshire may be sitting on close to $50 billion in the core insurance operation by the end of the year driven by rising cash flows from operations as well as the repayment of several investments Berkshire made during the financial crisis. Without a major “elephant” acquisition, low returns on cash could become a headwind for the company. Read this article for more details.
It has become relatively common to read annual reports of companies that previously engaged in regular share buybacks yet mysteriously decided to halt the practice during 2009 even as share prices hit multi-year lows. As The Economist has noted, share buybacks are making a comeback in 2010 just as markets are approaching levels last seen prior to September/October 2008. Why is this happening now and how should shareholders evaluate management decisions on buybacks? Read this article for more details.
Should Berkshire Hathaway pay a dividend? My view is that this is a fair question but the answer today is a resounding “no”. Read this post for more details regarding Berkshire’s dividend policy.