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The week's question
In December 2024, in the thread "Re: BRK: Why Not XOM?", BreckHutHigh asked the members: "What about the long road trips with kids?" This week it is put to everyone again. The button below opens the small thread re-asking it - read what others have said so far, then give your own answer as an ordinary reply.
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Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
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Author: mungofitch 🐝🐝🐝 GOLD
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Number: of 21939 
Subject: Re: OT: OXY
Date: 11/07/23 3:59 AM
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(3 month delayed reply)
"I just think it's supremely stupid of Gurufocus to call that shareholder yield."
...
What do you call Shareholder yield?


Simple: To anyone sensible, shareholder yield is the rate of stuff going to shareholders. Almost always that means nothing but dividends, though you might count spinoffs and liquidations.

If you own shares of XYZ all this year, and they do buybacks this year, you don't get that money. Somebody else does. It's not a return on your investment, so it's not sensible to think of it as a yield to owners of XYZ shares.

Every time a company does a buyback, the market cap of the firm falls and the value of a share remains unchanged.*
A lot of very shallow thinkers see the earnings per share going up, somehow without noticing the cash going out the door to people other than the continuing shareholders.

No need for the links, I know what the financial press defines as "shareholder yield". But it's a meaningless number designed by stock brokers who get paid by commissions on selling stock on whatever specious grounds they can get away with, not for doing thoughtful security analysis. It's no more meaningful than adding dividends and capex to get a bigger number than plain dividends.

From a great old article at the FT written by John Smithers:
Financial Times: Content 9a3965a0 7c8c 11da 936a 0000779e2340
"The FT reports regularly on the views of economists and stockbrokers. Readers might be intrigued by the conflicts between them but they should not be surprised. The purposes of the two groups are completely different. Economists are in pursuit of the truth and stockbrokers of commissions. The first principle of stockbroker economics is that all news is good.
...
The second principle is that the stock market is always cheap.
...
Data mining is the key technique for nearly all stockbroker economics. There is no claim that cannot be supported by statistics, provided that these are carefully selected.
..."


And, one might add, if the usual metrics don't show things to be cheap, just invent a new metric.

Jim

* except in the relatively rare occasion that buybacks are done at prices far from true fair value. More often than not, buybacks are done at prices that are too high, so the buyback is typically a small net reduction in the value per continuing share. Berkshire is in the minority, where more buybacks are done at lower valuation levels than at high ones and only at relatively attractive levels, so each buyback is a (very very small) increment to the value of a continuing share. It still isn't money going to shareholders, though, so isn't in any way a "yield": it's just good capital allocation, like opening a new store.

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This community has written 21,448 posts about Berkshire Hathaway. The article-length ones it recommended most:
BRK: Why Not XOM? · 62 recs · 2024
Second quarter comments · 60 recs · 2023
Berkshire's Profit Contributors · 57 recs · 2023
Summary of 2Q 2026 · 54 recs · 2026
3Q Summary · 53 recs · 2024
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