The Story of DuPont's 110-Year-Old Dividend

Long-term investors know that dividends are important to returns, but just how important they are is often overlooked. Over the past decade, nearly half of the Dow Jones Industrial Average's (DJINDICES: ^DJI  ) return to investors has been in the form of dividends, and those who reinvested through the recession saw a return to breakeven long before the index reached its old high.

^DJI Chart

^DJI data by YCharts

Buying dividends that can last the test of time lead to not only great returns, but also increasing payouts that can be used as a great way to pay for retirement. DuPont (NYSE: DD  ) is one of those long-lasting dividends that's been around for since the fourth quarter of 1904 and lasted through two world wars and countless recessions. Here's how DuPont does it.  

DuPont's business
There are three large components to DuPont's business; agriculture, performance chemicals, and performance materials.  

In the ag business, DuPont is one of the leaders in seeds and pesticides that increase yields for farmers, particularly in the corn market. What the company aims to do long-term is to use its research muscle to develop seeds and related pesticides and herbicides that work together to increase yields for farmers. This increases productivity while also keeping customers in the DuPont family of products.

The chemicals and materials businesses have long been what DuPont is known for, and performance materials provides plastics and other products to transportation, industrial, and electrical/electronics end markets. The use of plastics isn't going away, and DuPont has long been on the forefront of new products to industry. Performance chemicals serves a variety of end markets and is actually marked to be spun off by DuPont.

On top of this, there are smaller businesses such as nutrition and health, industrial biosciences, and electronics and communications that are each growing into new markets that could be key for DuPont's future growth.

DuPont's long-lasting dividend
The diverse set of businesses I've pointed out, along with a core competency in leading the world in chemical, material, and agriculture research, gives a foundation for the dividend payout that's lasted for well over a century.

The dividend would nearly triple investors' return over the past 20 years if it were reinvested.

DD Chart

DD data by YCharts

and here's how the dividend payout per share has grown since the mid-1980s. The dividend isn't increased annually, as some companies do, but the payout keeps increasing, which is good for investors.

DD Dividends Paid (TTM) Chart

DD Dividends Paid (TTM) data by YCharts

Foolish bottom line
DuPont's business is more volatile than some long-term dividend payers such as 3M or McDonald's, but that's in large part because of the markets it serves and the volatility they have. Long-term, the world needs more food from less land and high-performance chemicals and materials. Those trends will help drive solid, if not spectacular, growth in earnings as well as dividends.

Top dividend stocks for the next decade
The smartest investors know that dividend stocks simply crush their non-dividend-paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.


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  • Report this Comment On June 29, 2014, at 3:22 PM, funfundvierzig wrote:

    DuPont may have paid a dividend for the past 110 years, but let's take a look at recent history during which the past two sub-performing CEOs, Chad O. Holliday, Jr. and his protege and successor Ellen J. Kullman, held forth:

    During the past 16 years, DuPont has raised its quarterly dividend by a dime in four small steps from 35 cents to 45 cents. That rather paltry increase does not even keep pace with inflation.

    Long-term investors looking for robust dividend growth would be better off with DuPont's superior-managed rivals, 3M Corp and Monsanto, which have both increased their dividends in each year for the past decade.

    Merely the individual perspective of one retail investor, long MON, short DD...funfun..

  • Report this Comment On June 29, 2014, at 3:26 PM, funfundvierzig wrote:

    In ditching chemicals next year, 2015, via a spin-off, Ms. Kullman, DuPont Chieftess, will effectively be getting rid of 20% of her total DuPont revenues, or $7 billion out of $36 billion annual revenues. Gone will be a substantial cash flow.

    Bottom-line, the dividend of the shrinking DuPont stands a good risk of being reduced and shrunk itself.

    ...funfun..

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