Corner of Berkshire & Fairfax Message Board

General Category => Fairfax Financial => Topic started by: Alekbaylee on January 04, 2012, 05:02:40 AM

Title: $10 dividend again this year!
Post by: Alekbaylee on January 04, 2012, 05:02:40 AM
http://www.marketwatch.com/story/fairfax-declares-annual-dividend-2012-01-04-751170

Would love to see this going up a bit, to 3-5% of share price.
Title: Re: $10 dividend again this year!
Post by: woodstove on January 04, 2012, 06:02:45 AM
What I would like is to see 4 percent of book value returned annually to shareholders, as "rent" for the use of their capital.  Does not matter what the stock price is; the price will adjust according to corporate profitability, market moods, whatever.

Perhaps 2 percent paid out via dividend, and 2 percent towards share repurchases.  Whatever, as long as it's consistent policy.

The important principle is that Fairfax is no longer a startup.  Long-term shareholders, buy-and-hold, deserve an appropriate "rent".  Even with the best managements, some funds should be regularly removed from their span of control; it is a useful discipline to have to pay an annual dividend to shareholders.  Keeps the mind focused on doing good business, which means over the average long term, making tangible profits.  A good management, in a good business, can grow it more than 4 percent per year, hence still gets to run a larger company.  And dividends also grow over time, as the retained earnings (profits less 4 pct of book) grow book value in future.
Title: Re: $10 dividend again this year!
Post by: StubbleJumper on January 04, 2012, 07:36:11 AM
What I would like to see is a freezing (or reduction) of the share count.  FFH would better serve me by chopping the dividend back to their nominal $2/sh, and retain an additional $8/sh or $160m/year which it could then use for the various acquisitions that might otherwise result in the issuing of new shares (eg, Zenith).

SJ
Title: Re: $10 dividend again this year!
Post by: ourkid8 on January 04, 2012, 07:40:59 AM
I could not agree more!!!!!  I would prefer FFH to eliminate the dividend all together but we all understand the reason for it. 

S

What I would like to see is a freezing (or reduction) of the share count.  FFH would better serve me by chopping the dividend back to their nominal $2/sh, and retain an additional $8/sh or $160m/year which it could then use for the various acquisitions that might otherwise result in the issuing of new shares (eg, Zenith).

SJ
Title: Re: $10 dividend again this year!
Post by: Uccmal on January 04, 2012, 10:02:08 AM
Funny how people react.  Down $10.  so what has changed between yesterday and today.  Everyone already knew the dividend was coming.  No one has any idea what the exact bv is certainly not within a plus or minus 10 precision. 

I think they are taking the middle road.  Maintain a dividend at a high enough level for major individual sharehoders to take money out without having to sell shares.  By using the dividends they dont piss anyone off with egregious salaries, and obscene bonuses.  I prefer this method of paying people over many others.


Title: Re: $10 dividend again this year!
Post by: Alekbaylee on January 04, 2012, 10:12:00 AM
Funny how people react.  Down $10.  so what has changed between yesterday and today.  Everyone already knew the dividend was coming.  No one has any idea what the exact bv is certainly not within a plus or minus 10 precision

Yeah, suspect some greedy hands were expecting a higher dividend and some shareholders took the opportunity of the recent spike to sell a bit. Shares just changed hands and will again at the ex-dividend, then just before and after the annual results go out. Business as usual...
Title: Re: $10 dividend again this year!
Post by: Parsad on January 04, 2012, 11:05:52 AM
I think shareholders have to also understand that most of the senior management, as well as many other employees, have alot of their personal fortune tied to the company.  The dividend was implemented originally, so as to allow employees to garner some income from their shares without having to sell any.  I suspect that as many of these senior employees contemplate retirement, the last thing they would want to do is ever sell their Fairfax shares, but at the same time, they would like to continue to receive some sort of residual during retirement. 

Prem also has alot of charitable endeavours that he supports, but naturally would not want to sell his shares to maintain his philanthropic efforts.  The dividend is a way to retain their ownership, while benefitting other aspects of their lives.  I think shareholders have to resign themselves to that fact, as Fairfax will continue to maintain this balance between a modest dividend, opportunistic share buybacks and reinvestment of excess capital.  Cheers!         
Title: Re: $10 dividend again this year!
Post by: rkbabang on January 04, 2012, 11:32:36 AM
I just re-invest the dividend.  Fidelity does this for me automatically giving me the exact amount in fractional shares and all without fees.  So when Fairfax issues a dividend it increases my ownership stake in the company.  Most of my shares are held in a retirement account so I don't pay taxes on the dividend of those shares, it goes directly to buying new shares (new shares which will earn a dividend the next year).   Taxes do need to be paid on the dividend in my regular account though.  What I do is have Fidelity reinvest 100% of the dividend and I pay the taxes for it when I do my taxes in April of the next year.  So it does cost me some extra in taxes a little more than a year later.  Yes it would be simpler if the company just bought back stock, but I'm OK with the dividend too.
Title: Re: $10 dividend again this year!
Post by: NormR on January 04, 2012, 01:06:42 PM
Funny how people react.  Down $10.  so what has changed between yesterday and today.  Everyone already knew the dividend was coming.

While I tend to agree, something has changed.  The dividend remained flat which means that FFH will get the boot from dividend growth indexes and from the funds that follow them.  I'm not sure that it's a big effect in Canada, but being added to the high-yield aristocrats index was worth a 15% move on the day of the announcement on a U.S. stock I follow.  So, there will be some down pressure based on the quant portfolios out there.

But again the pressure in Canada may well be modest.  For instance, the Claymore S&P/TSX Canadian Dividend ETF (CDZ) follows a dividend growth approach and holds FFH.  But only ~$7.7 million worth.  Which amounts to about today's volume.
Title: Re: $10 dividend again this year!
Post by: icollins on January 04, 2012, 05:15:47 PM
Does Fairfax have a DRIP plan?  Thanks for sharing your ideas/comments on this great site!
Title: Re: $10 dividend again this year!
Post by: rkbabang on January 04, 2012, 06:04:39 PM
Does Fairfax have a DRIP plan?  Thanks for sharing your ideas/comments on this great site!

I don't think Fairfax has a DRIP plan, but Fidelity will reinvest dividends on most stocks for you.  They do it for all of my dividend paying stocks except ITEX.  I don't know why not ITEX, maybe it is too thinly traded.  They reinvest my fairfax dividends even though I own the pink sheets version.

--Eric