Warren Buffett's Berkshire Hathaway (NYSE:BRKa) (NYSE:BRKb) has been one of the absolute best companies to own over the long haul. If you've been a shareholder for decades, you've seen a greater than 20% annualized return on your investment.

One of the reasons the company's return has been so incredible is that Warren reinvests all of the company's cash to grow Berkshire's book value. While that has been great for investors from a return perspective, it has been not so great from an ownership perspective.

Why? Because it means that Berkshire doesn't pay dividends.

The downside of not paying
Because Berkshire retains all of its cash, none of the company's returns ever get back to investors until they sell. That means that as a shareholder, if you want to get any cash at all, you need to part ways with some of your stake in Berkshire. Yet in selling, you'd be giving up at least part of your ownership claim in one of the world's best companies. Even worse, based on the phenomenal strength of Berkshire's underlying businesses, if you sell, you'd be dumping a business that many regard as value-priced. It's a pickle that scores of investors face on a daily basis.

What's also interesting is that Buffett has always sought to foster a culture of long-term ownership among Berkshire shareholders. Indeed, the Oracle of Omaha constantly preaches the importance of a buy-to-hold perspective. Yet Berkshire has never initiated a dividend, which would significantly help shareholders share in the success of their company. Plus, for those investors who believe in the future of the company, a dividend would allow them to reinvest in Berkshire and increase their position over time.

The chance to reinvest dividends, in fact, would be great way to build up an even stronger nest egg in a company such as Berkshire. When a fundamentally solid business like this has been betrayed by a largely stagnant stock, reinvested dividends can grow one's position that much faster, accelerating returns when the stock finally does go up.

And a dividend is not above Berkshire's means. With its rock-solid balance sheet, tremendously strong operations, and multibillion-dollar cash hoard, Berkshire Hathaway could certainly support a substantial yield.

A better way
Fortunately, there are plenty of businesses out there that offer you a great way to receive the tangible rewards of your investing risks. They're the ones that actively pay dividends. By filling your portfolio with companies that pay, you get to take home cash without being forced to sell. Even better, many dividend payers and brokers have reinvestment plans. These allow you to automatically use your payment to purchase additional shares of the company you own -- for free. With those additional shares, you get an even higher payment the next time around, since you'd have a larger stake in the firm.

Best of all -- the choice is yours. The company pays you for owning a portion of it. You can choose to spend the money. You can choose to reinvest it automatically in the business that paid it to you. Or you can choose to let the cash pile up in your account until the market makes you an offer you simply can't refuse.

All in all, dividend payers offer a tremendous way to own companies and earn returns along the way.

Be like Buffett
And while Warren's own company doesn't pay dividends, take a gander at the portfolio he manages.



BRK Fraction*

American Express (NYSE:AXP)



Coca-Cola (NYSE:KO)



Moody's (NYSE:MCO)



Washington Post (NYSE:WPO)



Wells Fargo (NYSE:WFC)



*Percentage of the company Berkshire Hathaway owns.
Source: Berkshire Hathaway 2005 Annual Report.

It's not a coincidence that many of the publicly traded companies Berkshire Hathaway partially owns do pay dividends. Dividend-paying companies tend to possess many of the traits that Buffett looks for in an investment: strong underlying business, lots of free cash flow, stable revenues, and a reasonable to cheap valuation. (After all, if a company is yielding 2% or more, you can usually be sure that it's not excessively overvalued.)

Digging for dividends
At Motley Fool Income Investor, lead advisor Mathew Emmert prospects for and picks solid companies that pay their owners well. His ideal companies are ones, like those Berkshire owns, with real staying power whose dividends show that they are clearly managed on behalf of the shareholders. This combination of business strength and owner friendliness produces tremendous returns. In fact, not only has Income Investor easily beaten the S&P 500 with its picks, but it has done so without actively selling a single stock.

It's hard to argue with a market-beating investment strategy that pays you cold, hard cash and lets you continue to own some of the best businesses in the market. That's exactly what you get when you invest the Income Investor way. Join us today, and start uncovering which tremendously solid businesses you can get paid to own.

At the time of publication, Fool contributor Chuck Saletta had no ownership stake in any of the companies mentioned in this article. He would, however, be happy to own Berkshire Hathaway stock, if it would pay a dividend. Coca-Cola is an Inside Value recommendation. Moody's is a Stock Advisor recommendation. The Fool has adisclosure policy.