Why Westlake Chemical’s Dividend Yield Continues to Slide
Westlake Chemical’s dividend yield
Long-term investors invest in stocks whose dividend yields are high with good dividend growth. A dividend yield represents what investors get in return for every dollar they invest in a company’s equity.
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Westlake Chemical’s dividend yield has varied in the range of 0.9%–1.7% in the past five years. As of December 5, 2017, its dividend yield is 0.8%, while peers LyondellBasell (LYB), Eastman Chemical (EMN), and Celanese (CE) have dividend yields of 3.4%, 2.2%, and 1.7%, respectively, indicating that WLK has the lowest dividend yield among its peers. The current dividend yield is lower than the yield of one-year Treasury bonds.
Dividend on declining trend
WLK’s dividend yield rose between 2013 and 2Q16, but since then, it has been on a declining trend. Although WLK’s dividend has risen at a CAGR (compound annual growth rate) of 18%, it hasn’t stopped the dividend yield slide. The continued fall is primarily due to the increase in the price of the stock, which has more than doubled in five years. The trend is expected to continue if the stock continues to rise.
It will be interesting to see if WLK’s strong cash flow can support a higher dividend, which could improve its dividend yield and attract long-term investors.
Investors looking to hold Westlake Chemical indirectly can invest in the PowerShares Contrarian Opportunities ETF (CNTR). CNTR has invested 0.7% of its portfolio in Westlake Chemical as of December 5, 2017.