Andrew Bary is wrong.

I realize that it's not my place to have a beef with a Barron's columnist. However, I found myself shaking my head as I read Bary's "Loosen Up, Tightwads!" article over the weekend.

Bary argues that cash-rich companies that offer up nothing on the yield line should crack open those pocketbooks and initiate dividend payments. That's a popular sentiment. Idle cash is earning a pittance in interest income, and one can even argue that an aggressive payout policy may assist in stimulating the economy.

However, his argument that dividends are superior to stock buybacks is flawed. He also forgets that there's a third option beyond simply sitting on those greenbacks.

Loosen up? No, I say listen up.

Yield to the floor
Bary's column singles out the largest members of the S&P 500 class that refuse to share the wealth with their stakeholders. It may come as a surprise to discover that the four largest non-payers by market cap, if we include incoming freshman Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B), are hoarding away at least $20 billion apiece.


Net Cash

Per Share

Cash as % of Market Cap


$39.8 billion



Berkshire Hathaway

$20.0 billion




$24.5 billion




$25.1 billion



Source: Barron's. Net cash includes cash plus investments.

The nerve of these companies! They're making money hand over fist and aren't cutting quarterly dividend checks to their financial backers!

Yet cash-rich companies aren't necessarily stingy. Many of them embark on ambitious share-repurchase plans and return money to their shareholders without creating a tax liability for everyone.

Bary doesn't like that.

"Many companies, including Dell (NASDAQ:DELL), have wasted billions of dollars in the past on buybacks at much higher prices than their shares now command," he argues.

He's dead right about Dell, but this is a company that's been fading fundamentally for several years now. If Apple or Google had been voracious eaters of their own stock certificates, would their stocks be trading lower? Of course not. If anything, their shares would probably be worth even more today after nibbling away at much lower price points in the past.

Bary argues that dividends matter, especially during the past decade, in which payouts have softened the blow of the S&P 500's decline.

Really? Berkshire Hathaway has doubled in that time, and Apple is roughly an eight-bagger. Google didn't even go public until 2004, yet its stock has appreciated several times over its original $85 IPO tag. Cisco is the only loser during the lost decade, but overall, this group of non-dividend stocks has collectively spanked the S&P 500's return.

Dare I flip this argument around and suggest that chunky yields are hazardous to a portfolio's health? No way. However, let's just appreciate that cash-rich companies have to at least be doing a few things right to get into their enviable positions in the first place.

There is a third option
Dividends and buybacks are the two popular ways to return money to investors, but why can't a growth stock simply buy more growth?

Asking Google to crank out regular cash distributions is like putting a Corolla's engine in a Lamborghini or asking Emeril Lagasse what he wants from Mickey D's. Nobody buys into Berkshire Hathaway with the notion of topping Warren Buffett on deploying capital.

Mr. Market certainly isn't holding these stocks back for being greedy with their greenbacks. My only pet peeve is that cash-rich companies should be on shopping sprees. Wouldn't Apple make more money with its own search engine? Why isn't a cloud-computing champion like Google making a bigger play in enterprise software -- even if it means overpaying for (NYSE:CRM)? There has to be a laundry list out there of networking gear manufacturers that would be incremental to Cisco's income statement.

Most of these cash-rich companies may be doing fine these days, but there are few arguments against the acquisition of logical targets at accretive prices.

Bary wants a dividend. I don't. Keep your money, Google. Just go out and buy your shareholders something nice -- like more growth.

Google and are Motley Fool Rule Breakers recommendations. Apple and Berkshire Hathaway are Motley Fool Stock Advisor selections. The Fool owns shares of Berkshire Hathaway, which is also a Motley Fool Inside Value selection. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz realizes that cash is king, but sometimes it's the queen who rules the kingdom. He owns no shares in any of the stocks in this story and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.