So, here’s a thing: Dow (yep, the chemical giant) decided to chop its dividend in half. They’re saying it’s because of some “prolonged industry downturn,” plus they want to keep some “financial flexibility.” Sounds fancy, right? But if you’re into dividends, this isn’t the best news to get.
Now, the new deal is still $0.35 per share every quarter. That makes it a nice 6.4% yield. But can you really count on even this reduced payout? Or are we looking at another slash soon?
Here’s the kicker: Last year, Dow had negative free cash flow, and apparently, this year isn’t looking any better. No free cash flow means they can’t really afford to toss out dividends—the math just doesn’t add up. If they’re paying shareholders, they’re either dipping into their savings or taking out loans.
About that savings bit—they’ve got about $2.7 billion stacked up. But, oh boy, they’re also juggling over $15 billion in debt. They’ve been burning cash at a scary rate, so not much is left for us shareholders at the end of the day.
They’re predicting a rosier picture next year with positive free cash flow. Except, the $718 million expected still falls short of the nearly $1 billion they need for dividends, assuming it’s steady at $0.35 each quarter. Do the math, and it’s clear something’s off.
For ages, their dividend sat all comfy at $0.70. But once they made that cut, it’s like they opened Pandora’s box. Broken trust and all that jazz—who’s to say another cut isn’t lurking around the corner?
Honestly, with things not perking up cash-wise, I wouldn’t bet on this dividend being “safe.” Let’s give it a solid F on the safety scale.
Got a stock’s dividend you’re curious about? Throw those tickers my way in the comments. Oh, and feel free to poke around to see if we’ve covered any of your fav stocks lately. Just hit up the “Search” bar on our Wealthy Retirement homepage, type in whatever, and go wild.
Just a heads-up, though—the Safety Net does its magic only with individual stocks, none of those fund things like ETFs or mutual whatevers.
This piece first came out on Wealthy Retirement. Wander through if you’ve got time.
