Dividend of $0.46
On February 9, 2017, Dow Chemical (DOW) announced a dividend of $0.46 per share for 1Q17 on the company’s outstanding common stock. The dividend will be payable on April 28, 2017, to shareholders with a record date of March 31, 2017. Dow Chemical’s peers DuPont (DD), LyondellBasell (LYB), and Eastman Chemical (EMN) declared a dividend of $0.38, 0.85, and $0.51 per share, respectively.
Dow Chemical has been one of the longest dividend-paying companies. It will be Dow Chemical’s 422nd consecutive cash dividend. Dow Chemical has been paying a cash dividend to its shareholders every quarter since 1912. Assuming the current dividend rate, Dow Chemical’s dividend for 2017 is projected at $1.84. It indicates that Dow Chemical would maintain the same dividend rate from 2016. Since 2011, Dow Chemical’s dividend has grown at a CAGR (compound annual growth rate) of 15.40%.
Free cash flow
It’s important for investors to know whether the company is generating enough free cash flow to sustain dividend growth. Dividends are usually paid out of free cash flow. For our analysis, we’ll consider Dow Chemical’s free cash flow and convert it into free cash flow per share.
From 2011 to the end of 2016, Dow Chemical’s free cash flow per share grew at a CAGR of 7.7%. In contrast, its dividend grew at a CAGR of 15.40%. It isn’t positive for Dow Chemical. If the trend continues, it will be difficult for Dow Chemical to support its dividend growth.
Notably, investors can indirectly hold Dow Chemical by investing in the Materials Select Sector SPDR Fund (XLB). XLB invested 12.4% of its portfolio in Dow Chemical as of March 21, 2017.
In the next part, we’ll look at Dow Chemical’s dividend payout and current dividend yield.