Interpreting Olin's Dividend Today

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Part 2
Interpreting Olin's Dividend Today PART 2 OF 3

Is Olin’s Dividend Yield Attracting Investors?

Olin’s dividend yield

Before investing in a stock, long-term investors will look at better dividend yields among other major criteria, such as possible capital gains. A good and consistent dividend yield will generate a stable income for investors.

A dividend yield is a return that investors get for every dollar they have invested in a company’s equity upon the dividend payment.

Is Olin&#8217;s Dividend Yield Attracting Investors?

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With Olin (OLN) having made no change to its dividend rate, we can expect Olin to pay a dividend of $0.80 per share for fiscal 2017. Olin has been maintaining the same dividend for nearly 17 years. As of August 31, 2017, OLN’s dividend yield stood at 2.5%.

By comparison, peers LyondellBasell (LYB), Eastman Chemical (EMN), and Westlake Chemical (WLK) have dividend yields of 4.0%, 2.4%, and 1.1%, respectively. With the exception of LYB, Olin’s dividend yield is better than its peers.

Despite Olin’s dividend yield falling from 3.5% in 2012 to its current dividend yield of 2.5%, primarily due to variation in stock price, Olin’s dividend yield is still higher than the yield on one-year Treasury bonds, making it attractive for many long-term investors.

Dividend coverage

It’s important to know if a company’s earnings are sufficient to meet its dividend payment. At the end of 1H17, Olin’s dividend coverage ratio stood at 0.125x, which could be worrisome for some long-term investors.

Olin’s earnings per share have been under stress since 2015, and it reported a net loss of $0.01 and $0.02 per share for fiscal 2015 and fiscal 2016, respectively. If the trend continues, Olin might find it difficult to pay its quarterly dividend.

Investors can indirectly hold Olin by investing in the First Trust Materials AlphaDEX Fund (FXZ), which had 1.4% of its portfolio in Olin on August 31, 2017.

In the next part, we’ll examine the analysts’ views and recommendations for Olin.


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