Dow Inc. (NYSE: DOW) traces its roots back to 1897. Today, the company generates more than $57 billion in sales per year, has nearly 38,000 employees worldwide and manufactures in 31 countries.
It makes a wide variety of products, ranging from additives and modifiers used in skin care, paints and paper to polymers used in wires, cables and packaging.
Over the past century and a quarter, the company has undergone many changes – acquisitions, spinoffs and consolidations.
The current version of Dow has paid a dividend since 2019. It has remained the same at $0.70 per share each quarter, which comes out to a 5% yield.
The question is this: Is the dividend safe?
Let’s find out.
Free cash flow has been a bit inconsistent over the past few years.
This year, free cash flow is forecast to drop to $3 billion from $5.5 billion as earnings per share fall from $4.88 in 2022 to $2.32 and revenue declines nearly 22%.
Dow pays $2 billion in dividends, so the projected payout ratio is a comfortable 67%.
As a result of the deteriorating free cash flow and the limited dividend history, it’s hard to declare the dividend safe. Should cash flow decay more than expected, there’s a reasonable chance that the dividend will have to be cut.
Dividend Safety Rating: C
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