Warren Buffett has a love-hate relationship with dividends.
He has championed dividend-paying stocks as part of his investment strategy. But he has, at the same time, been reluctant for his own Berkshire Hathaway to pay dividends.
His reasoning for not paying dividends is both straightforward and sound. He believes that he can make more money for shareholders by investing their money than they can make for themselves.
And he is probably right.
For the last 50 years, Berkshire Hathaway shares have delivered annualised returns of around 21 per cent. Most investors would be hard pressed to achieve returns anything like that.
He once said that 98 per cent of his shareholders voted against receiving dividends. That is, indeed, a glowing endorsement of Buffett's investing philosophy and the returns his shareholders have enjoyed.
But times are changing.
Berkshire Hathaway's cash pile is getting so enormous that Buffett is finding it hard to deploy the cash, meaningfully.
Earlier this year, he tried to buy Unilever through one of his top holdings, Kraft Heinz, with some of the cash. But the offer was roundly rejected.
His cash hoard that continues to grow now amounts to more than $90 billion. That is almost equivalent to the annual economic output of a country such as Sri Lanka.
He wants to keep about $20 billion at hand in case his insurance business runs into large reinsurance losses. But that still leaves a whopping $70 billion sitting around doing very little.
What's more, the pile could grow around $20 billion a year from all the cash that he continually receives from his investments.
He quipped that there is no way that he can, three years from now, return to another Annual Meeting and tell shareholders that he is holding $150 billion in cash and convince them that he is doing something brilliant with it.
Buffett loves the things that cash can buy. But he loathes the returns it can generate.
He said that Berkshire earns less than 1 per cent on the cash that it holds on its balance sheet. That, he says, is like investing in a business that sells for more than 100 times earnings.
That is a pricey investment.
His partner, Charlie Munger, joked that it was even worse after taxes.
Exactly why Buffett could change his tune about dividends is unclear.
Perhaps it is because Berkshire has just grown too big. It will need to make big acquisitions to move the needle for shareholders.
Perhaps he is pondering a time when he is no longer picking suitable investments for Berkshire Hathaway.
Perhaps he is thinking about his own retirement when a regular stream of dividends might come in handy.
We shouldn't feel too sorry for Warren Buffett, though. Having too much cash at our disposal is a problem that most of us would like to have.
But Buffett makes some valid points.
Cash is a useful resource. But as an investment it stinks.
It generates a low return that doesn't even beat inflation. Over time, inflation will eat away at the buying power of our money in the bank.
Yet many people hang onto cash.
Unlike Warren Buffett we don't need to find billion-dollar investments to put our money into.
And therein lies the one advantage we have, as investors, over Warren Buffett.
Unlike Buffett, virtually every stock on the ASX is fair game to us.
Micro-caps. Small-caps. Mid-caps. Stocks that are way too small to make a difference or any impact on Buffett's investing returns.
Yet these are the exact same stocks that, courtesy of their size, have the ability to grow quickly, and therefore to earn you outsized returns.
Even better, many of them also pay dividends, often fully franked.
As an investor, buying such stocks gives you an edge, not just over Warren Buffett, but over the vast majority of fund managers.
Use it.
