A great dividend play: Dow Chemical (DOW)

By: ispeculatornew
Date posted: 10.27.2008 (4:00 am) | Write a Comment  (1 Comment)

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Over the past few weeks, the markets have moved up and down, though mostly down but in the mix of things, a lot of irrational movements have been occuring and it is often very difficult to find any logic in what has been going on. When such irrational behaviour occurs, some stocks become mispriced and to me, it seems like Dow Chemicals (DOW) is certainly one of them.

Dow Chemicals is the 2nd largest chemical company in the world (behind Dupont) and is truly a global company with plants, resources and clients from all over the world. As recently as a few months ago, the company started doing a strategic re-alignment basically moving out of some less profitable operations in order to put more energy into the highest value activities.

On Thursday, the company based in Michigan announced its results, a 6% increase in profits. “In our view, we will likely see a global recession through most of 2009. Although Dow is well positioned to ride out a global economic slowdown because it has cut costs and preserved cash, its more highly leveraged competitors “are not going to make it,” Liveris said during a teleconference with industry analysts.”

The company is said to be undervalued by many analysts and I tend to agree with that view. I think Dow will profit in the medium to long term from these tough times as the overcrowded industry has a few less players. As well, I think it is very important to look at the very high dividend yield offered on this stock.  DOW currently offers a .42$ quarterly dividend, which using Friday’s closes comes to a dividend yield a little over 7%.

DOW has a strong financial situation and solid cash flows and has been making EPS of between .42$ and .99$ in the past year ( a total yearly EPS of 2.49$). CEO Andrew Liveris has also said on CNBC as recently as last Thursday that as long as he was CEO, the dividend was there to stay.

As for other financial analysts, they have a overrate rating on Marketwatch with a target of 36.50$ (that’s about 50% of capital gains as well as the dividend gain!

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1 Comment

  1. Pingback by Festival of Stocks #113 — Old School Value — November 3, 2008 @ 3:06 am

    […] Financial Blogger presents A great dividend play: Dow Chemical (DOW) posted at Intelligent Speculator, saying, “Over the past few weeks, the markets have moved up […]

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