Is it feasible to buy high-dividend stocks at an appropriate price solely to collect dividends?

Recently, Warren Buffett’s annual letter to shareholders was released, sparking widespread market discussion. One point that left a strong impression on me was Buffett’s illustration of his investment ‘secret weapon’—dividends plus time—using the examples of Coca-Cola and American Express: namely, long-term, sustainable dividends. Coca-Cola is one of Buffett’s most iconic and widely recognized investment cases. Previously, discussions about this investment often centered on Coca-Cola’s brand strength, its outstanding business model, and the extraordinary returns generated by long-term holding. This article, however, re-examines the investment primarily from the perspective of dividend distributions. 1. Dividends are a critical source of stock returns If a friend who has never bought stocks asks you how one makes money from stocks, how would you answer? Many people would likely say, “Naturally, it’s all about the stock price—when the price goes up, you make money.” Is this correct? I’d say yes—but only partially. In fact, stock returns consist of two components: capital gains (i.e., price appreciation) and cash dividends paid by the company. Expressed as a formula: Stock Return = Price Change (%) + Dividend Income. In the mature U.S. capital market, dividends are a highly valued metric for investors, and corporate dividend payments have long become a standard practice for returning value to shareholders. Some outstanding U.S.-listed companies have consistently paid quarterly dividends for decades—even borrowing money to fund share buybacks and dividend payouts. For example, DuPont has paid quarterly cash dividends without interruption for over 100 years since its first cash dividend in 1904, making dividends one of investors’ most stable income sources. By contrast, China’s A-share market is relatively young, and its regulatory framework remains under development. As a result, many corporate owners have treated the stock market primarily as a fundraising channel, with few companies willing to distribute profits to shareholders. Consequently, many domestic investors have overlooked dividend income altogether. However, as China’s regulatory policies governing corporate dividend distribution continue to evolve and strengthen, an increasing number of high-quality A-share companies are now delivering consistent dividends to investors—such as Kweichow Moutai, Gree Electric, China Shenhua, and Yili Group—all of which maintain long-standing, stable dividend records. 2. Retrospective Analysis of the Coca-Cola Investment A global stock market crash erupted in October 1987, dragging down even high-quality stocks across the board. Coca-Cola’s share price—long watched by Buffett—plunged sharply, falling from a peak of around $53 to $29 before rebounding. Buffett began purchasing Coca-Cola shares at the end of 1988, acquiring 14.17 million shares at $42 per share (P/E ratio ~30x). In 1989, he added another 9.18 million shares at $47 per share (P/E ratio ~19x). Several years later, in 1994, he purchased an additional 6.6 million shares, bringing his total stake to exactly 100 million shares. With that, Buffett concluded his Coca-Cola investment, having committed a total of $1.3 billion. This investment coincided with Buffett’s investment prime. By then, he had fully moved past the psychological constraints of “cigar-butt investing” and had mastered his strategy of buying exceptional businesses at fair prices—focusing squarely on their future capacity to generate free cash flow. Within ten years after Buffett’s initial purchase in 1988, Coca-Cola’s stock exploded in value: by mid-1998, its share price had surged 13-fold, and its P/E ratio reached an all-time high of 50x.

DuPont in the Context of Economic Transformation: New Consumption + Minimalism

If our analysis has inspired you, please support us with a like. If you find it valuable, please share it with more friends. We welcome your comments or private messages—we look forward to in-depth discussions with you. Thank you for your attention and support! I. Financial Report Overview DuPont (DD) issued a press release on February 8, 2022, announcing its fourth-quarter and full-year 2021 financial results, along with its first-quarter 2022 dividend announcement. The report stated: “Net sales for Q4 2021 totaled $4.3 billion, up 14% year-on-year; organic sales rose 13% year-on-year.” DuPont also announced: “The first-quarter regular dividend increased by 10%, and the Board approved a $1 billion share repurchase program.” On the earnings announcement day, DuPont’s stock closed up 6.32%. II. Financial Data 1. Net Sales • Net sales for Q4 2021 amounted to $4.271 billion, up 14% year-on-year; organic sales rose 13% year-on-year. • Full-year 2021 net sales totaled $16.653 billion, up 16% year-on-year; organic sales grew 14% year-on-year. • From 2020 to 2021, DuPont’s major business segments contributed relatively balanced shares of total net sales, meaning the company’s overall operations were not significantly disrupted by unexpected events in any single segment. • Asia-Pacific region organic sales accounted for 48% of DuPont’s total organic sales; thus, the company’s revenue is meaningfully influenced by economic developments in the Asia-Pacific region. 2. Profitability • Income from continuing operations in Q4 2021 stood at $266 million, up 18% year-on-year; full-year 2021 income from continuing operations totaled $1.804 billion, up 175% year-on-year. • Net income for Q4 2021 was $447 million, up 14% year-on-year; full-year 2021 net income reached $6.545 billion, up 323% year-on-year. • Diluted earnings per share (EPS) from continuing operations in Q4 2021 were $0.60, up 22% year-on-year; GAAP diluted EPS from continuing operations for full-year 2021 was $3.23, up 198% year-on-year. 3. Balance Sheet • As of December 31, 2021, DuPont’s debt-to-equity ratio stood at 41%, down 4 percentage points year-on-year; total assets declined 36% year-on-year.

DuPont de Nemours Announces Quarterly Dividend of $0.60

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DuPont de Nemours declared a quarterly dividend of $0.60 per share payable on December 15. The company expects its payout ratio to decrease to 30.3% next year.

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