Perhaps I am one of the few across the internet who reminds everyone to pay attention to high dividend stocks.

Because, the recent hype around high dividends is spreading like the old tales of blue-chip stocks.

Indeed, some investors have started considering moving their savings into the stock market to invest in high dividend stocks.

There is nothing inherently wrong with high dividends; they offer stable annual payouts and a steady increase in stock prices.

During market downturns, a large amount of capital will flock to high dividend directions for risk aversion.

Especially the top-tier sectors such as banking, electricity, coal, and oil, which are key areas for allocation.

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When the market falls, you earn shares; when it rises, you earn the difference; and when it neither rises nor falls, you earn dividends. It seems to be a win-win situation, a sure profit.

Especially in the current market, which encourages dividends, it provides policy support for high dividend stocks.

The market's hype for high dividends has reached an unprecedented level of heat.

We all know that in the stock market, any direction that becomes too hot must carry a great risk.The excessive praise for large-cap white horses in the past, along with various core asset theories, actually follows the same principle.

Those large-cap white horses that were once hyped for their high-speed growth to maintain a high price-to-earnings ratio, why is no one talking about them recently?

Looking back, how many can really maintain double-digit growth over the long term?

The performance of many companies has started to decline, with high growth turning into low growth, and even beginning to slide, and there are also those that are incurring losses.

The stories of the former photovoltaic mao, pig mao, soy sauce mao, and edible oil mao, how many do you still remember?

The reason why the stock market has risks is that the stories are too compelling, making many people believe them to be true.

Regarding the direction of high dividends, we need to think about two questions.

Question one, can high dividends be sustained in the long term?

The essence of high dividends has two points.The translation of the provided text into English is as follows:

Firstly, the net profit of a listed company, how much is it exactly?

The essence of dividends is that the listed company takes the money earned on the books and distributes it as a return to shareholders.

The higher the net profit per share, the more the distributable amount, and the dividend rate and dividend yield will naturally be higher as well.

If there is not much money on the books, how can there be dividends, and where does the high dividend come from?

Therefore, most high-dividend listed companies are cash cows and have excellent cash flow.

From this perspective, the current high-dividend stocks, while not claiming long-term growth, can maintain the current net profit.

This is the main reason why many people advocate high dividends, because high dividends can bring a continuous cash flow dividend.

Secondly, the price determines the dividend yield.

If the stock price is 3 yuan and the annual dividend is 0.2 yuan, the dividend yield is 6.66%.

(Note: The second point was translated as requested, with the understanding that the sentence was left incomplete in the original text.)If the stock price rises to 5 yuan, but still pays a dividend of 0.2 yuan per year, the dividend yield would then only be 4%.

The level of the dividend yield is also affected by the stock price.

When the performance does not keep up with the stock price trend, the dividend yield will continue to decline, and the so-called high dividend no longer exists.

This means that when you buy stocks at a low price, even if the company's performance is not very good, it may still be a high dividend.

But if you buy stocks at a high price, even if the company's performance is very good, the dividend yield may not be high.

This is why those who bought Moutai at a low price feel particularly comfortable with the dividends every year, while those who bought at a high price feel that Moutai's dividends are very little.

Dividends will change due to stock price fluctuations, which has nothing to do with the performance of the listed company.

If this point is considered, high dividends must correspond to low prices.

Question two, will high dividends continue to rise?

The answer to this question is actually obvious, it will not.How could there be stocks that keep rising indefinitely?

Let's review the high-dividend individual stocks from 2019 to 2022, especially the four major banks.

You will be surprised to find that the four major banks have hardly increased in value, even when accounting for the dividend reinvestment.

In a bear market, people tend to gather around high-dividend stocks, while in a bull market, they speculate on thematic stocks, which seems to have become an unwritten rule.

This also indicates that the direction of high dividends will not always soar, but in some cases, it may fall into a quagmire of long-term stagnation.

The rise in stock prices depends on one factor: whether capital is willing to continue buying.

The capital buys into the direction of high dividends, not only because of the annual dividend distribution but also because high dividends are regarded as a theme for speculation.

Earning money from the rise in stock prices, coupled with stable dividends, is what the capital covets.

When the stock price is at a high level, the dividend rate begins to decrease, and capital starts to withdraw, making high dividends an illusion.

This is like the story of the big white horse, which eventually blinds the eyes in the increasingly absurd prices.How should we evaluate the current high dividend sector and the risks associated with it?

In a nutshell: short-term investors should be cautious, while long-term investors can continue to participate.

The caution for short-term investors is mainly because the high dividend direction has been somewhat frenzied in the speculation over the past two years.

This has led to many high dividend stocks no longer offering high dividends, with the dividend rate falling to a moderate level.

Plus, with stock prices high, investing at this stage is clearly a situation where the risks outweigh the benefits.

The reason for long-term participation is mainly because the cash flow return of the high dividend direction is still considerable.

Even if the stock price fluctuates to some extent in the short term, it does not affect the annual dividend income return.

If you extend the time to 3, 5, or even 10 years, and look across a bull and bear market cycle, the investment value of the high dividend direction is still very high.

The problem lies in the fact that retail investors always place great importance on immediate benefits, which is why they fall into the traps woven by the market.It's as if, looking at the past three years, the performance of Moutai has indeed been disappointing.

But what if you extend the period to five, eight, or ten years?

The logic of investment is correct, but what is ultimately wrong is the entry point.

Every time retail investors find an investment logic, it is at a high point in the market.

Because the market needs someone to take over, it will continuously release news and educate retail investors.

Just like two years ago, no one would mention high dividends, and everyone had no concept of it.

People would only complain that buying bank stocks didn't make money.

If you talk to them about high dividends, dividends, and rights issues, they will tell you that dividends are just dividing their own money.

The market's education takes time, and when the education is mature, the stock prices are at a high point, all looking for someone to take over.

When the market is hot, everyone will keep praising for traffic.When you notice an investment method becoming increasingly popular, it is the time when short-term risks are closing in step by step.

Investment is against human nature, and truly good investment opportunities are not exposed to the public eye.

Truth and reality are always in the hands of the few.