Warren Buffett: Closet Dividend Investor

Warren Buffett’s latest annual letter to Berkshire Hathaway (BRK-A) shareholders was published on Feb 26. The major theme of this letter was how to value Berkshire Hathaway as a company. Given the diverse nature of the company’s operations, this is no small task. Another important item that the Oracle of Omaha discussed was the dividend stream that flows to Berkshire on a regular basis.In a previous article I outlined several reasons why Buffett is a dividend investor. While his investment style in the 1950s – 1970s was simply to purchase stocks trading at a discount to their fair values, it evolved into purchasing entire businesses or equity stakes in them. The common characteristic of these businesses was that they had strong competitive advantages, high returns on equity and as a result were generating excess cash flows. Buffett then used these excess cashflows to invest in other businesses, thus further... Read more