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Analyzing Eastman Chemical’s Dividend in the Fourth Quarter

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Dec. 13 2018, Updated 12:40 p.m. ET

Eastman Chemical’s latest dividend

Eastman Chemical’s (EMN) fourth-quarter ex-dividend date is around the corner. Eastman Chemical will trade ex-dividend on December 14. The company has set December 17 as the record date. Investors who want to receive the dividend must hold the stock by the record date. Eastman Chemical expects to pay the dividend on January 4.

For the fourth quarter, Eastman Chemical has declared a dividend of $0.62 per share, which implies 10.7% growth over its previous dividend rate of $0.56 per share. Celanese (CE), LyondellBasell (LYB), and Westlake Chemical (WLK) have declared or paid a dividend of $0.54, $1.0, and $0.25, respectively. Since 2014, Eastman Chemical’s dividend has grown at a compound annual growth rate of ~13.2%. At the end of the third quarter, Eastman Chemical had ~142.4 million outstanding shares. If the company doesn’t buy back any shares before the key dates, then it would spend $88.3 million. Eastman Chemical’s dividend growth has been impressive. Next, we’ll see if Eastman Chemical’s free cash flow can support the current and future dividend growth.

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Free cash flow

In the first three quarters of 2018, Eastman Chemical reported a free cash flow of $369 million. The company expects free cash flow generation of $1.1 billion for fiscal 2018. In the past four years, Eastman Chemical has generated an average free cash flow of ~$889 million per year. The company has spent an average of 29% of its free cash flow to pay dividends. The company left enough free cash flow for other financing activities. Eastman Chemical’s strong free cash flow suggests that it can support its dividend plan and dividend growth.

Investors could invest in the Invesco DWA Basic Materials Momentum ETF (PYZ) to hold Eastman Chemical indirectly. PYZ has invested 3.1% of its portfolio in Eastman Chemical as of December 12.

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