On Barron’s “Under-Dividend” Crowd

Barron’s did something very interesting this weekend: they covered companies that could be paying out much higher dividends.   This is something investors should applaud as too many companies are determining that shareholders are more rewarded by share buybacks than they are with dividends. 

The funny thing is that many companies that should be paying dividends do not even pay them out.  Here is a list of the "under-dividend" companies:

COMPANY (Ticker)                                YIELD    P/E

American International Group (AIG)    0.9%    11.2
Goldman Sachs (GS)                            0.6%    10.6
Franklin Resources (BEN)                    0.4%    19.2
UnitedHealth (UNH)                                0.1%    15.6
Amgen (AMGN)                                        0.0%    12.9
Cisco Systems (CSCO)                         0.0%    18.6
Dell (DELL)                                               0.0%    22.0
Oracle (ORCL)                                          0.0%    17.9
Viacom (VIA)                                             0.0%    17.9
Berkshire Hathaway (BRK/A)                0.0%    18.7

Yep, Berkshire Hathaway is figuring out how to do a whale of an acquisition and it is stiing on roughly $40 Billion in cash.  This company could actually reward shareholders easier than any of these other companies.

Dell is bogged with issues, and if Cisco or Oracle issued a Microsoft-esque dividend the street might interpret that these companies are more like utilities rather than the growth engines investors classify them as. 

But some of these companies NEED to be paying more out. AIG, Goldman Sachs, Franklin, and UnitedHealth are all guilty as charged.  Throw in Berkshire Hathaway.  These companies need to starting paying out cash to holders, and there arer probably very few who would argue. 

Jon C. Ogg
May 19, 2007