Why does Berkshire Hathaway rarely pay dividends, and does Charlie Munger agree with this policy?

Why Does Berkshire Hathaway Almost Never Pay Dividends?

Hey there! I've spent years in the investment world and love studying Warren Buffett and Charlie Munger. Let's talk about why Berkshire Hathaway (Berkshire for short) almost never pays dividends. I'll keep it simple and easy to understand.

In short, the main reason Berkshire doesn’t pay dividends is that its leader, Warren Buffett, believes reinvesting profits back into the company generates greater returns for shareholders. Imagine you have some money: do you distribute it for everyone to spend, or use it to buy more income-generating assets? Buffett chooses the latter. He’s convinced that through smart reinvestment, this money can grow like a snowball, rather than being distributed and lost forever.

To break it down:

• Tax Efficiency and Compounding: If dividends are paid, shareholders face taxes (like U.S. dividend tax), reducing their take-home amount. But if retained, these funds can be reinvested to earn more, creating a compounding effect. This is how Berkshire transformed from a textile mill into an investment empire.
• Investment Opportunities: Berkshire always has lucrative opportunities, like acquiring companies or buying stocks. Buffett believes distributing cash means missing out. For example, their long-term holdings in Apple and Coca-Cola have multiplied in value.
• Shareholder Flexibility: Buffett has said shareholders needing cash can simply sell a portion of their stock. This lets them control how much and when to sell, avoiding forced distributions from the company.

Of course, this strategy isn’t for every company. Many pay dividends to attract investors seeking steady income, but Berkshire’s focus is long-term value growth, not short-term payouts.

Does Charlie Munger Agree with This?

Absolutely! Charlie Munger, Buffett’s decades-long partner, fully supports the no-dividend policy. Their philosophies align perfectly—both believe in "rational investing" and "long-term holding." Munger even once called dividends a "lazy approach" for management lacking better ideas, while Berkshire prefers deploying capital where returns are highest.

Munger has echoed this view in interviews and shareholder meetings. He sees Berkshire’s model as a "perpetual capital" machine, relentlessly compounding profits to create more wealth. That’s why he’s so bullish on Berkshire—it ignores trends and sticks to its own logic.

In short, if you invest in Berkshire, don’t expect dividends. But if you trust Buffett and Munger’s vision, holding long-term could bring surprises. Feel free to ask if you have more questions!