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The Man Who Refuses To Pay A Dividend

Posted by: Howard Silverblatt on January 15, 2010

The day I started at Standard & Poor’s in May 1977 the S&P 500 was at 100 (99.77), as was another stock – Berkshire Hathaway, which had a $98 bid and $102 ask. The S&P closed 1977 at 95.10, Berkshire closed at $138, and as of now the index is at 1133 and Berkshire is at $97,785 – who woulda tunk it. The reason for the history is that Berkshire has a baby stock, BRK.B ($3,253), which represents 1/30th of the regular stock (BRK.A), and that baby is doing a 50-for-1 stock split effective Thursday January 21 (new shares being issued; trading goes from lots of 10 to 100). While investors always buy issues based on the company, one of the reasons the baby was originally created (May,’96, $1100) was to give investors an opportunity to buy Berkshire at a more affordable price (of course, if the company hadn’t done it another entity would have purchased their full shares and issued the baby). After the split the adjusted baby price would be $65.06, a much more affordable level (average U.S. ASE, NYSE, NASD common is $37.78; $65.06 would be in the top 4%) for those who wish to invest in it. Note that if you buy BRK you are also buying sizable amounts of AXP, KO, COP, JNJ, KFT, PG and WFC.

Based on no evidence, no history, and absolutely no facts, I venture to say that at least some will want to own a piece of the legendary company run by the Oracle of Omaha, and that some may just want to get in on the short-term action of holding the issue during that period. Either way, it will be a show worth watching, and an indirect tribute to the man who refuses to pay a dividend and defines the term plowback.

P.S. Back when I started at S&P I could have purchased a full share of Berkshire with one weeks pay, net – I don’t think I have to worry about Ken Feinberg calling me any time soon

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Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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