Back in the 1960s Koch Industries paid out a pretty small dividend to shareholders. In 1961 the company (by my estimation) had roughly $117,000,000 of revenue, profit of $3.5 million (the revenue was derived based off historical single digit profit margins), and Koch Industries paid out total dividends of $150,000. The year that Fred Koch died in 1967 Koch Industries had about $177,000,000 of revenue but only paid out dividends of $300,000 (according to Sons of Wichita). Between the start of the 1960's to the end of the decade the dividends for Koch Industries more than doubled. Charles Koch didn't take over Koch Industries until 1967 (after his father Fred Koch passed).
In order to try to best estimate the historical dividends for Koch Industries what I had to do is take the revenue of the company utilizing sources like Forbes and Fortune. They both estimate the revenues of Koch every year and then I had to apply a profit margin assumption for the company. In this 1974 Forbes article Charles Koch doesn't exactly say what the profit of Koch Industries is by confirms that $100 million of profit is an accurate number. The company had $2 billion of revenue in 1974 which would make the profit margin roughly 5%. However, by the 1980's the profit margin of Koch Industries was only 3%.
By the late 1990's the profit margin was only 1% as Charles and David Koch had to battle their brothers and other Koch Industries shareholders which led to a major distraction where questionable deals. It should be pointed out that historically Koch Industries has gone through ups and downs like they did in the 1970s losing money with the estimated lost ranging from $50 million to $80 million-within their shipping business, then again in 1998 when they purchased Purina Mills with an estimated loss of $120 million on that business).
When I evaluate the historical profit margin of Koch Industries in the past from either published data or estimates I get roughly a 2% profit margin. I assumed a 2% profit margin from 1984 until 2002. After the Purina Mills loss and the Koch vs. Koch lawsuit was over the leadership decide to make changes which I believe would result in higher returns over time. For that reason the profit margin from 2003-2011 is 5%. In 2012 it was estimated that Koch Industries had a profit margin from Forbes of 10%. However I believe this is somewhat overstated as Koch industries over the past decade or so has gotten into a lot of different technologies and even Chase Koch has mentioned that a lot of these projects are "pre-revenue" (this was covered here) or in other terms not making any money. My estimate would be that Koch might have to write down some of the businesses under Koch that are related to technology. With that all said beginning in 2011 I assumed the profit margin was on 7% (compared to 5%). This also reflects the fact that historically Koch Industries was tied to the oil and gas business (which historically made up a large percentage of their revenue and profit) and we finally business which can have much lower margins than other businesses.
There might be questions of how do I know that this data is accurate and this is a good and valid question. One way to check is Pro Publica within the past couple of years published information regarding the top income earners which included Charles and David Koch. Pro Publica had estimated that from 2013 to 2018 that David Koch had roughly $234,000,000 of annual income each year. When I look at the estimates that I have for 2013 to 2018 I come up with an average of $231,000,000 which is fairly close. However there are some things for instance that I'm not including (for example any salary or bonuses that Charles and David Koch earn from Koch Industries).
The growing dividends over the years has lead to the Koch Industries shareholders being able to enjoy their investment. David Koch would enjoy toys from now and then. He mentions in this article that in the 1980's had only one Ferrari and not 15. David would enjoy taking a private jet with his close friends and visit Africa, the Himalayas and the Amazon jungle. In addition to this he in the past he has had a $100,000 Alaskan cruise where he rented a minesweeper that was converted into an excursion ship, and he would charter three helicopters before getting into the boat. Even in the 1990's David had a car and driver pick him from his office (however the family didn't have a social secretary). Later on the Koch family had a chef and three nannies. In addition to spending money on himself David also would regularly give over half of his income to charity). In this post I covered David Koch and his lifestyle. Even before David had his extreme wealth he did like to live a little large. In August 1993 David through a lavish party on a Saturday night after beating prostate cancer at his Southampton estate. David spent $100,000 just on the fireworks, With dancing by the tennis courts in pool and had several famous sous chefs that had made to order omelets at 3:00 AM. Now that is a life! I covered the different homes and lifestyle of David Koch in this article.
The growth of Koch Industries was fueled by a couple of things. The first is Koch Industries policy of reinvesting 90% of the profits back into the company (I don't know of any other major company public or private that does this). Reinvestment of profits back into the company compounds quickly over time. Also Charles Koch has spent his whole career focusing on ensuring that his company can add value and provide products and services that customers value. Believe it or not this isn't typical of most companies. Many companies just believe here is our product and the customer needs to accept it without thinking through if it provides value, how it can be improved, and the wants and needs of customers. The company back in 1960 was only paying out $150,000 to all Koch shareholders, which grew to $28 million by the early 1980's, and I estimated in 2024 the dividends Koch Industries pays out is roughly $691 million (based on a profit margin of 7%, corporate tax rate of 21%, and reinvestment of 90% of the earnings back into the company). This would say over between 1984-2024 the dividends grew at an annual rate of 10%. Charles Koch and his company have rewarded shareholders over many decades with adding more commas and zeroes to their dividend checks and the main shareholders are now billionaires as a result of the long standing growth.
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