Buy This, Not That: The Truth About This 7.34% Dividend

Shah Gilani|March 12, 2025

Would you buy a 128-year-old blue-chip company paying a hefty 7.34% dividend?

At first blush, this sounds like one heck of a deal.

I assure you, it’s anything but.

Two tickers you all sent in this week caught my eye: Dow Inc. (formerly Dow Chemical) and DuPont.

And they are absolutely perfect for Buy This, Not That.

Both are multibillion-dollar chemical companies.

But that’s where the similarities end.

Because one is a value trap luring investors with its unsustainable dividend…

While the other is tariff-resistant with fantastic prospects.

Click the thumbnail below to check out today’s Buy This, Not That.

TRANSCRIPT

Hey, everybody.

Shah Gilani here with your weekly BTNT – Buy This, Not That.

First of all, thank you to everyone for sending in all the tickers.

I’m going to hit a couple of them today that you wanted me to go over.

Today’s battle is between Dow Inc. (DOW) and DuPont (DD).

I’m going to start with Dow (formerly Dow Chemical).

I get why you want me to look at Dow.

Because, yeah, it’s got a 7.34% dividend yield.

I’m looking at that and going, “Holy mackerel, that’s fantastic!”

But there’s a problem there.

So, let me start with the dividend.

If you like Dow for its dividend, be careful because they can’t sustain that payment.

The problem is the net income available to common shareholders, which is the bucket they pay the dividend from, isn’t big enough.

The cost of the dividend is $1.976 billion annually.

The net income available to common shareholders is $1.1 billion.

So, to pay the dividend, they have to borrow money.

They have to be doing some kind of financial engineering.

We know Dow for its materials, packaging, specialty plastics, ethylene, propylene, coatings, silicone metals, etc.

But maybe many of you don’t know that they’re also in the property, casualty, and reinsurance business.

So, if they’re using the premium money to pay the dividend, that game can’t go on for long.

If they have some heavy payouts on their property and casualty and on the reinsurance – and with the storms, fires, and things that this country has been experiencing, let alone the rest of the world – yeah, there could be some problems.

But as far as Dow goes, we’re looking at a $25 billion company with fabulous revenue of $42.9 billion.

But people, the profit margin is 2.6%.

Color me unimpressed.

Now, I’m going to pull up a chart for Dow because I’ll just get right to the point.

It’s not a buy here.

How about ugly?

That chart is ugly, people. It is down 50% off of its highs.

If you’re looking to catch a falling knife, you could maybe try and buy it down here. Good luck with that. I just don’t think the numbers justify it.

The balance sheet is highly leveraged.

Debt to equity is just way above anything that I think is good given what they do.

But the chart says it all for me.

So as far as Dow goes, the answer is NOT.

Now, when it comes to DuPont, symbol DD, it’s a buy.

I’ll tell you why it’s a buy.

Certainly, it’s a buy of these two.

But it’s a buy because it’s held up really well.

None of what it does is really tariff-related.

Now, you probably know DuPont for again, its fabrication of semis, integrated circuits, advanced packaging, chemistries for fabrication, printed circuit boards, and laminate substrates.

So it’s really in that sweet spot doing a lot more with the semiconductor universe.

DuPont certainly has better numbers.

It’s got a much better-looking balance sheet.

Here we are talking about a $32 billion market cap company, $12.30 billion in revenue, with a decent profit margin of 5.68%.

It’s got a tiny dividend, not even worth talking about for its yield, which is 2.15%.

You’re not gonna buy it for that yield.

But as a buy, it’s held up pretty well. And I think it’s down just a little bit from its highs.

But, again, it’s been okay. It has weathered all of the downturn recently pretty well. It hasn’t collapsed.

So I think as far as DuPont goes, do you want to put some money in DuPont? Yes.

You can buy it down here. I think it’s worth a shot down here.

So that’s it for today.

DuPont versus Dow.

Go with DuPont, not DOW.

It’s Wednesday morning.

Markets are open.

We’re seeing a bounce. Let’s hope it’s not a dead cat bounce. Be careful out there.