Should Berkshire Hathaway Start Paying Dividends?

I was quite surprised when Berkshire Hathaway (NYSE:BRK.B) shares took a 5% hit to the chin on the first trading day that followed the bombshell announcement that Warren Buffett would be stepping down as CEO. After all, it’s more than likely that Buffett has already given his successor, Greg Abel, more of a say over how things are run over at the legendary conglomerate that’s now worth north of $1 trillion.

In any case, the dip seems like more of a buying opportunity than anything else, as investors learn more about the man poised to take Berkshire to the next level. Indeed, he has some pretty massive shoes to fill. But he’s been trained for the job for more than seven years now. And I do think it will be very interesting to see how Abel goes about running the company as he builds upon Buffett’s teachings while leaving his own mark on the firm. 

Greg Abel to be CEO in 2026. Will he warm up to dividends?

As Abel takes over come 2026, the questions about initiating a dividend are bound to follow as the conglomerate’s mountain of cash (nearing $350 billion now) continues piling up to record heights. Over Buffett’s 60 years at Berkshire, he’s been asked about dividends numerous times.

It’s a recurring question that he’s probably sick of already. And while Buffett has explained his case (many shareholders, myself included, don’t want Berkshire to pay a dividend given there’s no better deployer of capital than Berkshire!), I’d expect the income-hungry shareholders will pose the same question to Abel as he does more of the talking come the 2026 annual shareholders meeting.

Of course, only time will tell if Abel is more open to initiating a dividend. However, I’d argue that his stance will be no different from that of his legendary boss’s. As such, I expect the same old “no” to such a question, even as the cash pile continues to swell as the firm runs into a bit of a buyer’s drought of sorts.

Why it doesn’t make sense for Berkshire to pay a dividend, even as the cash pile grows to record heights

In my view, having no dividend is one of Berkshire’s unique strengths. It’s far better to have Buffett, Abel, and savvy investors like Ted Weschler and Todd Combs (Ted and Todd, as they’re often referred to during annual meetings) have the final say in what to do with excess cash than to just line the pockets of shareholders with more dividends. Sure, there are periods where there’s a lack of bargains and nothing to buy.

However, Buffett and company know very well that crises and crashes happen. And it’s best to have dry powder ready to go so that the bargains that nobody else has the liquidity for can be grabbed. Think of it as saving up your paychecks in the months before a Black Friday sale on an item you’ve been eying.

Of course, there’s a downside to having too much cash in Treasuries for an extended period of time: one can miss out on further market gains as pricey stocks get even pricier. Either way, investors should have faith that Berkshire’s managers can deploy cash that would have gone towards dividends better than they can.

As Trump tariffs cause more volatility and perhaps more downside, Berkshire will have a growing number of options. Whether it chooses to be a bigger net buyer of stocks remains the big question. Either way, it’s hard not to be happy when the market moves lower if you’re a big Berkshire shareholder, knowing that they’ve got cash to spend on a wide range of lower-priced names!

The bottom line

Berkshire shouldn’t start paying dividends, even as Abel heads to the CEO’s office. Though Berkshire isn’t immune to severe market drawdowns (it wasn’t in 2008 and probably won’t be in the next recession), its massive cash pile allows it plenty of options come the next crisis moment, which may not be all too far off.

It’s unclear when the next market meltdown will occur, but Berkshire will need dry powder when bargains become abundant and the phone starts ringing off the hook. In the era of tariffs, I think the case for owning Berkshire over the S&P 500 has never been stronger, as the firm stays patient in pricey markets while greedy in cheap ones.

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