MW LyondellBasell's dividend hike boosts yield to nearly 4-times the S&P 500's
By Tomi Kilgore
The new implied yield of 5.5% makes it the highest yielding stock in S&P 500's materials sector
LyondellBasell Industries NV said Friday that it raised its dividend by 7%, reinforcing the chemicals and plastics resins company's position as having the highest-yielding stock among its materials-sector peers.
The company $(LYB)$ raised its quarterly dividend to $1.34 a share from $1.25 a share, marking the 14th straight year of dividend growth. The dividend will be paid to shareholders of record on June 10.
Based on Thursday's stock closing price of $97.42, the new annual dividend rate implies a dividend yield of 5.50%, which is nearly triple the 1.88% yield of the Materials Select Sector SPDR ETF XLB and is almost four times the implied yield of the S&P 500 index SPX at 1.40%.
"Today's 7 percent dividend increase reflects LyondellBasell's confidence in our ability to navigate dynamic markets, unlock value with our focused new strategy and grow shareholder returns," said Chief Executive Peter Vanacker.
The stock's new implied yield is by far the highest in the materials sector ETF $(XLB)$ - the next highest is Amcor PLC's $(AMCR)$ 5.06% yield - and would make the stock the 16th highest yielder in the S&P 500.
The stock not only has a high yield, but also a relatively low price-to-earnings ratio. The stock price is 11.71 times the earnings outlook over the next year, according to FactSet data, which is the second lowest in the XLB and nearly half the S&P 500's P/E ratio of 21.70.
The stock has dropped 3.5% so far this week to close Thursday at a three-month low, putting it on track for the worst weekly performance in seven months. Over the past 12 months, the stock has gained 8.8%, while the XLB has advanced 19% and the S&P 500 has rallied 28%.
And despite the stock's high yield and low relative valuation, it isn't loved by the analyst community. Of the 27 analysts surveyed by FactSet who cover LyondellBasell, only a third are bullish, while 16 are neutral and two are bearish.
The company's credit, meanwhile, is rated at BBB at rating agency S&P Global, which is just two notches above speculative grade, or "junk" territory. The outlook is stable and the business risk is "satisfactory."
Earlier this month, the company announced the launch of a strategic review of the European assets of its olefins & polyolefins and derivatives business units.
KeyBanc Capital analyst Aleksey Yefremov said then that while the review was the "right step," as it could improve the quality of the company's portfolio, it also highlighted the "structural challenges" the company was facing in Europe.
He added that the timing of the review was "peculiar," given earnings in the business were at their lows and the interest for acquisitions remained muted.
"To be clear, the sale at this valuation is not assured or even a very likely outcome, but rather a favorable scenario that we would consider to be of moderate likelihood, but certainly possible," Yefremov wrote in a note to clients.
In the company's first-quarter report released in late April, the company reported revenue that fell 3.1% from a year ago to $9.93 billion, while adjusted earnings per share fell 39% to $1.53. But the results beat the FactSet consensus for revenue of $9.70 billion and EPS of $1.36.
-Tomi Kilgore
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(END) Dow Jones Newswires
May 24, 2024 07:55 ET (11:55 GMT)
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