Billionaire Warren Buffett issued his annual letter to Berkshire Hathaway stockholders Saturday and used part of it to tout the benefits of repurchasing company stock. The federal government added a 1% tax on buybacks this year.
Buffett said critics of stock buybacks are “either an economic illiterate or a silver-tongued demagogue” or both and all investors benefit from buybacks as long as they are made at the right prices.
Among his other comments in the letter, Buffett said Berkshire’s remarkable record of doubling the returns of the S&P 500 over the last 58 years with him at the helm is the result of only “about a dozen truly good decisions” or about 1 every 5 years – adding that
it helps to start early and live into your 90s as well.”
Buffett’s letter, long one of the best-read documents in the business world, was shorter than usual this time at 8 pages with an entire page devoted as a tribute to his 99-year-old Berkshire Hathaway partner Charlie Munger.
Buffett also defended his policy of not paying a dividend, writing he believes he can generate a bigger return for shareholders by investing that cash – much of it coming from dividends paid by Coca-Cola and American Express.
Berkshire owns $25-billion dollars in Coke stock and received $704-million dollars in dividends from the company while its $22-billion in American Express holdings brought in $302-million in dividends. Berkshire paid $1.3 billion for each of them in the 1990s.