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fairfax declares annual dividend - $10USD


ourkid8
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I was hoping for a bump this year given the acquisition of BRIT and the strength of underwriting, but maybe next year...2% isn't an awful yield, just has been the same for the last 6 years.

 

Maybe 2016 is the 7th year of lean dividends before we feast

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I was hoping for a bump this year given the acquisition of BRIT and the strength of underwriting, but maybe next year...2% isn't an awful yield, just has been the same for the last 6 years.

 

Maybe 2016 is the 7th year of lean dividends before we feast

 

Amen!

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Agreed but we all know the reason for the dividend and it is not going away.  I wish they would pay Prem a fair wage and cut the dividend but that's another story. 

 

As long as FFH is issuing new shares, we don't need a bump.  Quite to the contrary, perhaps a cut would have been in order a few years ago to forestall dilution.

 

 

SJ

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Agreed but we all know the reason for the dividend and it is not going away.  I wish they would pay Prem a fair wage and cut the dividend but that's another story. 

 

As long as FFH is issuing new shares, we don't need a bump.  Quite to the contrary, perhaps a cut would have been in order a few years ago to forestall dilution.

 

 

SJ

 

Prem holds about 2 million shares, as I recall.  That gives him 20 million per year, and a net worth well north of 1.2 B.  The dividend isn't for him and never was.  It was for other FFh employees who were shareholders.  I imagine Prem lives well within his 600 k salary anyways.  What could he possbily spend the money on?  He's like most of us on this board - sensibly frugal. 

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http://www.cornerofberkshireandfairfax.ca/forum/fairfax-financial/why-does-fairfax-pay-a-dividend/

 

Read Sanjeev's response: 

 

"Prem fixed his salary at $600K per year many years ago, not unlike Buffett's fixed salary.  Several years ago, Prem decided to institute a small dividend, so that both he and the many executives at Fairfax, could receive an annual salary based on the economic growth of the business without having to ever sell their shares.  The compensation structure would also be equitable for every shareholder as well.  "

 

Agreed but we all know the reason for the dividend and it is not going away.  I wish they would pay Prem a fair wage and cut the dividend but that's another story. 

 

As long as FFH is issuing new shares, we don't need a bump.  Quite to the contrary, perhaps a cut would have been in order a few years ago to forestall dilution.

 

 

SJ

 

Prem holds about 2 million shares, as I recall.  That gives him 20 million per year, and a net worth well north of 1.2 B.  The dividend isn't for him and never was.  It was for other FFh employees who were shareholders.  I imagine Prem lives well within his 600 k salary anyways.  What could he possbily spend the money on?  He's like most of us on this board - sensibly frugal.

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This subject comes up every year at this time and Fairfax is always criticized by a few for issuing a dividend. Why criticize encouraging management to have a stake in the company and be rewarded similar to the rest of the shareholders? however, I would rather see the dividend based on yearly performance rather than a fixed amount.

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For Canadian shareholders, is the US$10 dividend converted to Cdn$ by the brokerage firm or by FFH first and then distributed to shareholders?

 

 

Cdns receive the divvy in US dollars.  If the shares are held in an account denominated in Canadian dollars, the divvy is automatically converted (at the typical outrageous brokerage exchange rate).  Better for us to simply hold FFH in a US denominated account and either re-invest the US dollars into something else or convert them using Norbert's Gambit.

 

 

SJ

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This subject comes up every year at this time and Fairfax is always criticized by a few for issuing a dividend. Why criticize encouraging management to have a stake in the company and be rewarded similar to the rest of the shareholders? however, I would rather see the dividend based on yearly performance rather than a fixed amount.

 

 

Ownership itself is an adequate stake which ensures that management's interests are reasonably well aligned with other shareholders.  The lifestyle needs of a half-dozen people in the C-suite hardly justifies the resulting capital management decisions.

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I am definitely guilty and one of the individuals who complain on a yearly basis.  I believe it was last year or two years back in which they paid a dividend and immediately after issued shares for an acquisition which truly pissed me off.  I would have rather Prem and team fairly compensated salary/bonus based on performance wise instead of having to issue a dividend.  Since the dividend is $10/share, I hope it stays at this rate ongoing and never increases. 

 

This subject comes up every year at this time and Fairfax is always criticized by a few for issuing a dividend. Why criticize encouraging management to have a stake in the company and be rewarded similar to the rest of the shareholders? however, I would rather see the dividend based on yearly performance rather than a fixed amount.

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“I would have rather Prem and team fairly compensated salary/bonus based on performance wise instead of having to issue a dividend.”

 

I don’t necessarily disagree with that but doing it in this way nothing is hidden, it is transparent and equitable to all shareholders. It also helps prevent some of those obscene bonuses paid out to senior staff in some companies. I also suspect there may be some tax advantages for Prem in doing it this way (?).

 

But why not set up a profit sharing plan for the team and shareholders by extending a dividend based on the performance of the company?

 

Also I would imagine that Prem and team are not the only ones who depend on this dividend. I suspect that there may well be many shareholders who depend on that dividend to provide them with income. That in turn perhaps makes FFH shares more desirable, increases demand and in turn increases share price. There is more to share price than company value.

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This is always going to be a matter of personal opinion but I am fully in favour of the dividend.  It means owner/managers (big and small) are treated the same way as owners.  It means there's no debate about how a bonus system should be structured.  It means there can be no skew in the incentives.

 

Ultimately paying a dividend means paying each owner money they already own.  Paying a bonus means transferring wealth from shareholders to managers.  Dividend wins every time - for me.

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This is always going to be a matter of personal opinion but I am fully in favour of the dividend.  It means owner/managers (big and small) are treated the same way as owners.  It means there's no debate about how a bonus system should be structured.  It means there can be no skew in the incentives.

 

Ultimately paying a dividend means paying each owner money they already own.  Paying a bonus means transferring wealth from shareholders to managers.  Dividend wins every time - for me.

 

+1

 

Cheers,

 

Gio

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the dividend probably wont change

for Canadians holding a Dividend paying stock has tax advantages

 

I got the impression Prem is not a fan of the dividend either (certainly not increasing it)

However, given the dual function as both a bonus system for invested employees

and the tax benefits to long term Canadian shareholders

the best way forward will be to leave it unchanged

 

 

p

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