Analysis of the Dow Dividend Cut: Causes, Effects and Outlook

Dow Inc. (Dow) lowered its dividend due to the impact of a long -term decrease in chemical industry, poor financial results, leverage, rates and commercial certainty. Weak financial results and lower sales and income for a longer than expected time have taken a toll. The dividend of the company has been constant since the second quarter of 2019 and it was finally cut this year.

The share price has fallen dramatically since half past eight 2022. Investors sold this dividend stock Because of the worries about poor results and a potential dividend reduction, as the safety problems increased. Depending on the recovery of industry and future operational and financial results, a different reduction can occur.

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Overview of Dow Inc.

Dow Inc. Was founded more than 100 years ago in 1898 and has its headquarters in Midland, Mi. Nowadays it is a large worldwide company for chemical and material sciences. The current organizational structure was completed after DOW was merged with Dupont in 2017 and the Materials Science Division was subsequently split off in 2019, which resulted in the establishment of the Dow Chemical Company.

The company works via three segments: packaging and specialties plastics (52% of sales), industrial intermediates and infrastructure (28% of sales) and performance materials and coatings (20% of sales). It also works via four vertical market: packaging (30% of sales), infrastructure (40% of sales), consumer (20% of sales) and mobility (10% of sales). Large subsidiaries are Rohm and Haas and Dow Corning, and it operates various joint ventures.

The total turnover was $ 42,964 million in 2024 and $ 41,819 million in the last twelve months.

Dividend Cut announcement

During the second quarter of 2025, on Thursday, July 24, Dow Inc. (Dow) cut his dividend. The company’s quarterly dividend rate amounted to $ 0.70 per share before the announcement. The dividend is now $ 0.35 per ordinary share, a reduction of 50%. In the announcement On July 24, the company stated,

“… that the board of directors has explained a dividend of 35 cents per share. The adjustment of the payment size reflects the balance approach to Dow and improves the financial flexibility in the midst of a continuing challenging macro -economic environment.”

“Today’s announcement is intended to ensure that we maximize the long-term value, while we navigate in a long-term industry-reading and the resulting lower-voor-for-langer profit environment. With this adjustment we are the payment size to offer extra financial flexibility. Do a competitive douden, while we prioritize, while we prioritGenditenschesen, while we have a competitive dincetitation, while we have a dougend with the dougendiging, while we have a dougends, while we have a dougends, while we have a dougends, while we have a dougendiging with the dougendiging, while we have a dougendiging with the dougendiging, while we have a dincetification, while we have a dincetification, while we have a dougendiging with the dougendiging, while we have a dincetification with the dougendiging, which we have to prioritize with the dougenden, which we have to prioritize, with the dougendiging with the Dow. have, ‘San-Jim Fittering, Dow chair and CEO.

“Our approach to capital allocation remains unchanged and we are committed to supplying leading shareholders’ returns during the cycle. As the industry recovers, DOW is positioned to deliver profitable growth by unlocking our growth dervilations, to improve the margins and reinforcement,”

Later, in the second quarter Profit call Transcriptstated the CEO,

“… 50% dividend reduction effectively in the third quarter of this year,” it says: “This is the most careful way to maintain financial flexibility and to maximize the long -term value for our shareholders.” He emphasized the commitment to a “competitive dividend in the economic cycle”

Effect of the change

By reducing the dividend by 50%, Wild DOW wanted to reduce its quarterly and annual benefits, increasing its financial flexibility. The company experiences lower income for longer than expected due to a long -term decrease in industry. Moreover, the free cash flow was negative in 2024 and the balance is used with a low interest cover.

The company’s dividend percentage has been constant since the second quarter of 2019, so it had no line of increase. The company was not a dividend group of growth. The result is that less free cash flow (FCF) is required for the dividend distribution, so that the retailer can reduce debts and reduce growth.

Challenges

Dow is confronted with a challenging business environment because of an industry, resulting in lower income. Rates and commercial insurities worsen the weakness of the sale and probably influence the profit. Moreover, the balance was used and the interest collection has decreased.

Chemical industry

The chemical industry is confronted with a long -term decline in a cyclical company. The primary final markets of Dow are automotive, packaging, construction and construction, industrial, consumers and healthcare. Some of the final markets are confronted with a demanding environment. The production is, for example, contracts, the sale of automotive is a decrease and the construction and construction industries experienced lower activities. As a result, DOW’s turnover in 2022 fell by more than $ 10 billion annually. This in turn has reduced the FCF and profit per share, which influences the dividend coverage. The timing of a recovery of the industry is currently uncertain.

Rates and land security

Rates are another major care for Dow. The company is active worldwide and probably exports products from other countries to the United States and vice versa. Rates are direct costs for importers and are passed on to consumers.

Debts and leverage

Dow is a lever company with more than $ 15 billion in net debt. It currently has about 1.19 times interest coverage and a lever ratio of approximately 2.92 times. However, it has a creditworthiness of investment quality of BBB/BAA2, which reflects poor financial performance and expectations of weaker income. In addition, the dividend payment of the company was increased and it was governed Share Purchasing Despite poor financial results.

Dividend safety

Due to the weaker turnover and profit per share (“EPS”), DOW’s dividend safety statistics were poor. EPS has fallen since the recent peak in 2021 at $ 8.38. However, it fell to $ 6.28 per share in 2022 and fell further in 2023 to $ 0.82 per share. Consensus estimates indicate a loss of ($ 1.01) per share in 2025.

As shown in the graph below of Stockrover*, the dividend yield quickly increased to more than 10%. This percentage is a value that is usually associated with a distressed company. It was also much larger than the 4-year average of 5.94%. After lowering the dividend by around 50%, the Forward dividend yield Is now around 5.96%. The quarterly rate is $ 0.35 per share. However, the yield is still considerably higher than that of the S&P 500 average.

The annual dividend now requires approximately $ 992.6 million ($ 1.40 annual dividend x 709 million shares), compared to $ 1,966 million in 2024. However, because EPS will probably be negative in 2025, the profit will not cover the annual dividend distribution and the payment ratio will be negative. We expect the annual difference in cash flow requirements to improve liquidity and financial activities.

Although the dividend is now in a better position and safer, the dividend of the company is still not completely safe. Further decrease in demand, poor operational and financial results, or increased rates and commercial insecurity can lead to a different reduction in the dividend.

Consequently, we see equity as a risk of a different dividend reduction unless the results improve.

Last thoughts about Dow (Dow) Dividend Cut

A long -term decrease in industry and weak final markets have influenced sales and profitability. Lower income for a longer than a related period, leverage and low interest coverage have caused problems for Dow. Rates and commercial uncertainty have further complicated matters complicated in 2025. The combined effect resulted in falling dividend safety statistics. As a result, DOW has reduced its dividend. However, we regard the company as a risk of a different substantial reduction.

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