Many moons ago, I met Damon.

Damon was the brother of a girl I was dating at the time... and I'd learned that he was a fairly successful day trader.

I had no proof of this but he'd been doing it as his full time income for 5+ years so I assumed he knew we he was doing.

And naturally I was excited to meet someone who shared similar interest to me.

We met at a night market in Taiwan... if you like hot sweaty environments and incredible seafood then those will be right up your street.

And within a few minutes the conversation naturally turned to stocks.

Damon was big into trading binary events (like earnings calls) in the biotech industry.

An area which was, and still is, fairly alien to me.

But then the conversation got onto Warren Buffett.

This was in 2016 when Berkshire had just taken a position in Apple.

So I asked Damon what he thought about that.

His response shocked me

"I don't care about that scammer and his pyramid scheme"

Not going to lie, I was massively taken aback.

Warren Buffett... scammer... did I hear him properly?

So I pressed him on it.

"Well Berkshire has never paid a dividend and Buffett uses the money to buy dividend companies to pay himself"

I remember letting out a chuckle, a tad awkward perhaps, at Damon's adamant perspective.

With a friendly, though somewhat perplexed smile, I started to delve into the real meat of the matter.

"It's true that Berkshire Hathaway doesn't pay dividends, but there's another angle to this you might find interesting. You see, Warren Buffett prefers share buybacks over dividends. In fact, he has a pretty sound reasoning for that."

With a quizzical look, Damon leaned in, his curiosity piqued despite his initial disdain. I explained further

"When Berkshire Hathaway buys back its own shares, it decreases the number of shares available in the market. This increases the value of the remaining shares, effectively rewarding the shareholders. So, you see Damon, Warren Buffett isn't scamming anyone. He's simply using a different strategy to reward his shareholders. And this method, in many cases, can create just as much wealth for shareholders as dividends do."

I think it's fair to say that Berkshire's buyback strategy has worked hugely in their favour... especially as Buffett has advised Tim Cook to buyback roughly 30% of Apple's stock over the past decade... which has supercharged Apple's own returns.

And I will never shun a company just because they have a low dividend... or pay no dividend at all.

Because share buybacks can be just as effective at generating long term wealth.

Oliver

P.S.

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