Oh boy, LyondellBasell, huh? So, apparently, this stock seems to be on a bit of a rollercoaster ride. Like, imagine one of those old rickety wooden ones that creak ominously at every turn. The stock price has been slippin’ and slidin’ down a hill for a while now. And get this, the dividend yield has shot up to 9% — makes you raise an eyebrow, right?
Folks have been blowing up my inbox asking me to spill the tea on how safe that dividend really is. Spoiler alert: it’s a bit shaky.
LyondellBasell, interestingly, is in the business of turning oil into, uh, other stuff. Like polymers and gasoline and ethers. The essentials for… well, modern life, I guess? Makes ya think about what you’re actually putting in your car, doesn’t it?
Now, here’s the kicker: their free cash flow chart looks almost like a map of a ski slope. Like, the steepest one on the mountain with all those moguls. Not what you want in your financial files, trust me. Free cash flow has nosedived the past few years and, gulp, it’s expected to crash by 59% soon. Yikes.
With these numbers, the company is set to pay out dividends that are more than double its expected cash flow. Last year’s payout was already a jaw-dropper at 87%, but this year’s looking at a whopping 218%. Crazy, right?
Companies pull off paying more cash in dividends than they rake in by dipping into reserves or, well, borrowing. LyondellBasell has some cash — $1.9 billion — but isn’t shy about taking on debt either. A cool $10.7 billion in long-term debt, to be exact.
Reality check: with cash flow circling the drain, they really ought to be focusing on that towering debt. But, surprise surprise, management doesn’t always get it right.
One flicker of positivity — or a candle in a windstorm — is their streak of upping dividends since 2021. And even through the wild early COVID days of 2020, they kept the dividend steady, following an upward path since 2012. Gotta hand it to them, prioritizing dividends is their jam.
But let’s face it, if the cash flow doesn’t get a grip, they’ll probably have to trim that juicy dividend. I mean, a 9% yield is tempting, but how stable can it really be? Not very, I’d say.
Now, what stock’s dividend safety should I dive into next? Drop me a ticker in the comments. Seriously, I’m listening! Oh, and if you’re itching to know if I’ve covered your latest obsession, just smash that search icon on the Wealthy Retirement homepage. Easy peasy.
Quick note! This Safety Net gig is all about individual stocks, so no mutual or exchange-traded funds here, folks. Keep that in mind.
