Talking Stocks 2.0

[vitalsigns]

In theoretical finance and in many real-world applications (as mentioned above, Berkshire being of particular note), dividends vs. buybacks do not matter (assuming tax equivalency).

The holder of a stock that doesn't pay dividends could easily replicate a dividend by selling a portion of the stock....et voila, you have an effective dividend, and your total stock value drops by just as much as if a dividend was paid.

I do, however, think there's an argument that *some* companies are better run when they have to generate cash flow to sustain dividends (and if expected, even increase them periodically).

But there's also an argument that the focus on cash dividend distributions for *some* companies is a bad idea, particularly those companies with a high cost of capital (debt or equity) and good ongoing ROI.

Would you want Apple to have paid dividends throughout the 2000s? No.
Would you want Altria to pay dividends now? Probably yes.

20/20 hindsight, of course...