Warren
Buffett is one person that does not believe in distributing dividend. His
company Berkshire Hathaway always attempt to retain every1$ and make that 1$
worth 2$ or more. Buffett says that if investors want cash they could sell a
small percentage of their shares but as long as the company has great projects
or investments to make the money will be used on those.
His
secret of being one of the richest men in the world is his ability to find the
right company, which he always choose the big companies and buy big amount of
shares, to make sure that he get a seat at company investor meetings.
His
thinking on dividend agrees with the theory of Modigliani and Millar's idea of dividend
irrelevance theory. However, will all investors like this? Because, there are
investors who will demand for their returns as dividend every year. All investors are not
indifferent.
However,
Berkshire Hathaway is a successful company even without any dividend payouts. I
believe this is something to do with Warren Buffett's reputation an intercity.
Investors trust Warren Buffett as a leading investor in the world makes
them the assurance on their invested money. This conclude that even managers
could build trust among investors, especially among investors who are concerned
on long term investments to hold the investments with the firm even without
dividend payouts, but emphasizing on shareholder value creation. This will
enable the company to retain money to invest in much more profitable
investments and projects to create long term value in return.
Source : http://video.pbs.org/video/1907176086/
http://www.youtube.com/watch?v=aL766NK2ynw
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