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Buffett: "If we’re keeping $1 bills that would be worth more in your hands than in ours, then we’ve failed to exceed our cost of capital.”
If the money is worth more in shareholder hands, it should be returned via a dividend or buyback. The market's job is allocating capital.
If the money is worth more in shareholder hands, it should be returned via a dividend or buyback. The market's job is allocating capital.
Buffett's view on returning capital to shareholders is described in the 2012 BRK letter. For example: "disciplined repurchases are the surest way to use funds intelligently: It’s hard to go wrong when you’re buying dollar bills for 80¢ or less." berkshirehathaway.com/letters/2012lt…
A market is constantly trying to allocate capital based on opportunity cost and that drives efficiency/growth. An essential part of that process is moving capital away from companies that can't earn a return that is higher than what shareholders otherwise can achieve elsewhere.
