Berkshire Hathaway never brought dividends to shareholders.
With Berkshire Hathaway's vice chairman Greg Abel will replace Buffett, many are already speculating on what changes will happen to the transition.
Over the years, deploying capital in Berkshire Hathaway has become increasingly difficult.
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After 60 years of epic helm Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B)Warren Buffett was surprised at Berkshire’s annual meeting, announcing that he plans to resign as CEO by the end of the year. He will continue to serve as chairman of the board. Vice Chairman Greg Abel is the successor and will try to fill Buffett's big shoes. Buffett's departure from the CEO role will end a great run, which makes Berkshire's stock significantly better than the broader stock market and turns Omaha's Oracle into a legend. Although Abel and Berkshire teams are expected to continue to follow the script that makes Berkshire a behemoth today, change is inevitable. Berkshire never paid any dividend despite its size and financial resources. Will this change soon?
Buffett has been asked many times: Why doesn’t Berkshire pay dividends? After all, Berkshire's generating a lot of cash and paying dividends may be in line with Berkshire's brand, conservative, stable stocks, where capital can be deployed with caution. Additionally, Buffett bought a large number of stocks for Berkshire's portfolio, which paid dividends.
Buffett just believes that there are some better ways to deploy capital to grow the business and reward shareholders better. When he thought Berkshire's stock was at a "meaningful discount on intrinsic value," he made three priorities in Berkshire's business, reinvesting Berkshire's business, conducting acquisitions and buybacks.
Given that he is regarded as one of the best deployments in the capital ever, it is difficult to argue with Buffett's logic. Berkshire's stock generated an annual growth rate of 19.9% between 1965 and 2024, compared with S&P 500 10.4%, including dividends. Overall, Berkshire's stock appreciated 5,502,284% during that period, and based on what's going on so far in 2025, that number may look better soon.
Once Buffett leaves the CEO, Berkshire is likely to start paying dividends. Given that Buffett is considered the greatest investor of all time, investors will accept his promise when he says he can deploy capital in a way that is more beneficial than paying dividends. But Abel, despite being a successor of power far more than power, may not have the same luxury. "As long as Buffett hosts a show, because he thinks it might be a tool his successor uses better, there is still dividends," said Gregg Warren, Berkshire analyst at Morningstar.
Even before Buffett announced that he would resign, there was a lot of change in Berkshire, simply because of how big the company had become. Consider what Buffett wrote in his annual letter to shareholders last year:
There are only a few companies in this country who can really move needles at Berkshire, and we and others have endlessly picked these companies. We can value some; some we can't. And, if you can, they have to have attractive prices. Outside the United States, there are essentially no meaningful choices for candidates to make capital deployment at Berkshire. All in all, we have no sign that may cause people to be shocked.
Berkshire rarely invests in small or micro stocks that will 10 times as it won't get enough shares to even make the company worth it, with the company's stock portfolio worth nearly $275 billion. It has become a victim of its own success.
Now, as mentioned above, Buffett prefers to return capital to shareholders through stock buybacks, but management also likes to realize that not buying back shares when the company's valuation is too high. Recently, it was a problem, with Berkshire buying back shares in 2024 and in the first quarter of 2025 than in previous years.
This year, Berkshire's stock has been viewed as a safe flight, with its business diversity, cash hoarding and careful management, which has been navigated for multiple cycles. In theory, dividends will fit the subject. Apparently, Abel will hope to keep Berkshire's flavor, which has driven the stock to incredible gains over six decades, but he will never be Buffett. Some changes are likely to be some changes, and they may end up being one of them.
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Bram Berkowitz has no position in any of the stocks mentioned. Motley fool has a place and recommends Berkshire Hathaway. Motley Fool has a disclosure policy.
Will Berkshire Hathaway start to generate dividends soon as Warren Buffett resigns as CEO? Originally published by Motley Fool