Two Biggest Dividend Holdouts: Twin Mountains of Cash, Yet No Payout

In terms of business operations Google (GOOG) and Berkshire Hathaway (BRK.B) wouldn’t exactly intersect in any Venn diagram configuration. But the companies share two distinctive traits.

Boatloads of cash:

BRK.B Cash and ST Investments  Chart

BRK.B Cash and ST Investments data by YCharts

And no dividend.

More than $93 billion in combined cash for the two big boys and no dividend. We’re talking about the 7th largest company measured by market cap (Google) and the 11th largest (Berkshire Hathaway) insisting they’ve got better ways to use their capital even though their cash stakes keep climbing. Earlier this year the anti-dividend duo bid farewell to a third mega-sized cash-rich compadre when Apple (AAPL) the largest company by market cap, decided to start paying a dividend. AAPL is still sitting on $29 billion in cash, and far more than that in investment securities.

Run a YChart Stock Screener of the largest firms by market cap and of the top 100 only four others aren’t doling out dividends: Ecopetrol (EC), Amazon (AMZN), eBay (EBAY) and Facebook (FB). Yet the combined cash on hand for those four doesn’t come close to matching either Berkshire Hathaway or Google.

BRK.B Cash and ST Investments  Chart

BRK.B Cash and ST Investments data by YCharts

In the case of Berkshire Hathaway, chairman Warren Buffett has certainly earned the right to not pay a dividend. He’s more than proven he’s got a knack for good ways to put cash to use besides returning it to shareholders. But at $47 billion, that cash stake is extremely bloated. Buffett has said he considers $20 billion to be his base sleep-at-night reserve level. So right now he’s got an extra $27 billion or so that could be deployed.

The problem of course, is price. The “elephants” he would like to bag aren’t available at a price the inveterate value investor would pay right now. And as long as we stay out of recession and financial crises, the opportunity to shell out big loans akin to the sweet deals with Goldman Sachs (GS) and Bank of America (BAC) seem limited.

Dividends aren’t likely in Berkshire Hathaway’s future, but some cash could be used for stock repurchases, which would boost the conglomerate’s per-share earnings. A little more than a year ago, Berkhsire Hathaway announced it would repurchase shares if the stock’s book value sagged below 1.1 x the stock price. It’s close.

BRK.A Price / Book Value Chart

BRK.A Price / Book Value data by YCharts

Over at Google, management has so far been hell bent on maintaining its growth bona fides rather than succumb to paying out a dividend. The $45.7 billion question is how good the relatively young firm will be in making those capital allocation decisions. The $12.4 billion spent to buy Motorola Mobility-the deal closed this past May-was seen as a steep price to pay.

One potential scenario that might entice Google to issue a dividend centers on what happens in Washington next year. Google, like Apple, Cisco (CSCO) and other global brands records a big chunk of its earnings from overseas operations. It’s common practice to leave foreign earnings overseas rather than bring ‘em back to U.S. and pay our corporate tax rates.

In the event that Washington does decide to tackle broad tax reform in 2013 and include a lower corporate tax rate (or tax holiday) that might entice Google to pay out something. All it has to do is follow Apple’s lead. While the world’s largest company initiated a dividend this year, the $10.60 per share annual dividend rate equals 23% of net income for the past quarter annualized, and the dividend yield is about 1.9%. Clearly, Apple still has plenty of cash to deploy after satisfying its dividend.

Carla Fried, a contributing editor at, has covered investing for more than 25 years. Her work appears in The New York Times, and Money Magazine.



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