Saturday, August 29, 2009

The Berkshire Hathaway Dividend

Warren Buffett’s company doesn’t pay dividends, so I don’t ever expect to get an actual dividend check from my investment in Berkshire Hathaway.

But the other day, I did secure a pretty decent yield. And all it took was one 15-minute phone call.

You gotta hand it to Warren. He’s a pretty darned good salesperson. His last annual letter to shareholders made it clear that expects company owners to do their part in supporting Berkshire’s operating companies, one of which is Geico.

Charlie and I will convene the annual meeting at 3:15. If you decide to leave during the day’s question periods, please do so while Charlie is talking. The best reason to exit, of course, is to shop. We will help you do that by filling the 194,300-square foot hall that adjoins the meeting area with the products of Berkshire subsidiaries.

Last year, the 31,000 people who came to the meeting did their part, and almost every location racked up record sales. But you can do better. (A friendly warning: If I find sales are lagging, I lock the exits.)

But what was really interesting was this flyer that came along with the annual report:

Here’s a close-up view of the body copy:

It certainly caught my attention, especially the line at the very bottom offering a discount to Berkshire shareholders.

So what the heck? I gave them a call. Not only did I get a better rate than I had with my former insurance company, I got an extra $56 discount because I own the stock.

That’s really not much of a dividend if you own one of Berkshire’s Class A shares (about $100,000 each as of Friday).

But I’m more of a Class B share kinda guy. Those sell for around $3300—and I don’t own many. (Okay, I own exactly one).

My cost basis was around $3700 so if I’m saving $56 per year on Geico insurance, that’s like getting a 1.5% yield on my investment. Plus I’m contributing to my own company’s retained earnings.

That’s a pretty decent yield for a company that doesn’t pay a dividend. And all because I saved a bunch of money by switching to Geico.

Posted by Richard Bloch

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