Dow Inc.’s (DOW) stock is down 14% after the chemical producer announced that it is cutting its quarterly dividend payment by 50%.
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The new distribution will be $0.35 per share, down from $0.70 previously, the company announced. In a news release, Dow Inc. said: “Today’s announcement aims to ensure we maximize long-term shareholder value as we navigate a prolonged industry downturn.”
Before the distribution cut, Dow Inc.’s stock boasted a dividend yield of 9.22%, one of the highest on Wall Street. Based on the new payout, the yield will fall to around 5%. The new dividend payments will cost the company $1 billion per year.
Conserving Cash
Dow Inc. said that it is expected to generate free cash flow of $500 million this year and $600 million in 2026. That’s a big decline from 2020 to 2023, when Dow Inc.’s free cash flow averaged more than $5 billion per year. Management said the dividend is being cut as they conserve cash.
The lowered dividend was announced alongside Dow Inc.’s second-quarter financial results. The company known for making chemicals found in plastics and silicone reported an earnings per share (EPS) loss of $0.42 and sales of $10.1 billion. Wall Street had been looking for a loss of $0.17 and sales of $10.2 billion.
Management said they are grappling with a global chemical market that is oversupplied, driving down profit margins and forcing them to control costs, including the dividend payout.
Is DOW Stock a Buy?
The stock of Dow Inc. has a consensus Hold rating among 14 Wall Street analysts. That rating is based on two Buy, 10 Hold, and two Sell recommendations issued in the last three months. The average DOW price target of $31.69 implies 6.84% upside from current levels.
