W.R. Grace’s dividend yield
The dividend yield is what investors get in return for every dollar they invest in a company’s equity during their holding period.
Apart from looking for capital gains, long-term investors look for stocks with high dividend yields and high dividend growth. Higher dividend yields and higher dividend growth provide investors with steady income.
As of March 14, 2018, W.R Grace’s (GRA) dividend yield stood at 1.5%—its highest level since it started to pay dividends on a quarterly basis. In comparison, GRA’s peers LyondellBasell (LYB), Olin (OLN), and Eastman Chemical (EMN) have dividend yields of 3.7%, 2.4%, and 2.0%, respectively. At present, GRA’s dividend yield is lower than those of its peers and also lower than the yield generated by one-year Treasury bonds. Thus, it’s an unattractive alternative investment option for long-term investors. However, investors should note that GRA’s dividend has grown at a CAGR (compound annual growth rate) of 37.2%.
Why GRA’s dividend yield is growing
GRA’s dividend yield has doubled from 0.7% in 2016 to its current level of 1.5%. The rise in its dividend yield has primarily been driven by its impressive dividend growth. At the same time, GRA’s stock price has remained range-bound. On a year-to-date basis, the stock’s price has fallen 5.3%. Since GRA began to pay its dividend, its dividend growth has outpaced its stock price growth, resulting in higher dividend yields.
Investors can indirectly hold GRA by investing in the Vanguard Materials ETF (VAW), which has invested 0.5% of its portfolio in W.R. Grace as of March 14, 2018.