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Thornhill responds on dividends and Buffett

[Editor's Note: Peter Thornhill is a respected author and financial markets commentator, and a lecturer at the Centre for Continuing Education at Sydney University. He has been part of a lively conversation in our comments section as a result of Ashley Owen's article on dividends, and sent in the following additional comment which requires more space].

Much as I admire Warren Buffett I have never invested in Berkshire Hathaway (BRK).

I, perhaps shortsightedly, chose to invest in dividend-paying shares.

This happens to suit our circumstances as, at this time, income is paramount and I do not want the hassle of trying to time my exits from shareholdings trying to produce cash flow from capital.

I take some comfort from the chart below as, despite comments to the contrary, we don’t appear to have missed out on much. We still have the capital and the dividend growth has been awesome.

Thornhill

Thornhill

7 Comments
Il Falco
July 19, 2017

Actually, CSL and COH are curious examples.....what are the franking levels of those dividends?

CSL is interesting as they are constantly buying back stock. Management seems to understand that buy-back is more tax effective for most shareholders than unfranked dividends....in the Australian context, 50% more effective outside of super :) Of course you'd need the ability to sell a little stock...but of course if one has the wherewithal to pick winners such as these, I am sure they can sell a few tranches as well.

Peter Thornhill
July 19, 2017

Shrinking as they become global companies. But remember my earlier comments; imputation is the cream. Their dividend growth has been phenomenal.

Il Falco
July 19, 2017

Ha ha. Rather than cherry pick some specific stocks that you imply you bought in 1996, how about TSR comparison between BRK and some of the LICs you favour, which are the core of your portfolio? Sounds like a much more fair comparison :)

Ian A
July 19, 2017

Yes I agree. BRK is a huge heavily diversified conglomerate which is a akin to an entire portfolio in inself.

What sensible investor would have a portfolio that only consisted of CSL and COH. Hardly great risk management and I shudder at the thought of what the SANF would be like!

So for a fair comparison at least compare BRK against the equivalent of a diversified ASX portfolio such as a large LIC like AFI / ARG.

Peter Thornhill
July 19, 2017

Why pick amazon and Berkshire?
I thought I'd cherry pick.

Peter Thornhill
July 19, 2017

Being a sensible investor I don't and I hope you're not assuming that's all I own.
By the way, add CCP and EVT to the list as well as MLT, BKI, etc.

I thought as Amazon, a single stock, could be pitched up alongside BRK I might do the same.

Peter thornhill
July 21, 2017

Bought COH in 1995 at the float for $2.50.
I chose the dates to coincide with the chart in the original article. I'm not implying anything.

 

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