Dow Inc. (NYSE: DOW) is nearing a five-year low, having declined approximately 50% since its separation from DowDuPont in April 2019. The company maintains a steady dividend, but its yield has surged to 10.3%, the highest in the S&P 500, as net sales for the latest quarter fell by 3% due to competitive pressures.
Dow’s operating margin has plummeted to 3.3% from pre-pandemic levels of around 8%. With negative free cash flow, the company struggles to cover its dividend without resorting to asset sales or additional debt. A recent $2.4 billion asset sale and $1 billion in expected proceeds from a court settlement provide short-term relief but raise concerns about the long-term viability of its dividend policy amidst ongoing challenges in demand and competition.
To address these challenges, Dow paused its Path2Zero project, expected to save $1 billion, while also targeting $1 billion in cost savings by 2026. The company has manageable debt with only $500 million maturing in 2025; however, sustained low margins may force a dividend cut if economic conditions do not improve.
