Dow Inc. (NYSE: DOW) has been downgraded by BMO Capital Markets from Market Perform to Underperform, with a reduced price target of $22, down from $29. This shift reflects growing concerns over the company’s financial health amid declining earnings and market challenges.
The downgrade is tied to several pressing factors.
🏭 Declining earnings have become a major concern, with Dow’s operating profit falling from $9.5 billion in 2021 to an expected $1.2 billion in 2025, marking a significant deterioration in profitability.
🏭 Broader market weakness is weighing on performance, as soft pricing and lower volumes across key end-markets have led to reduced operating rates and a pressured EBITDA outlook.
🏭 The company’s dividend sustainability is also under the spotlight. With a dividend payout ratio of 700%—well above industry norms—the likelihood of a dividend cut is rising.
These mounting pressures have led to a 49% decline in Dow’s stock over the past year, with just 17% of analysts rating it a Buy compared to the S&P 500 average of 55%.
💰 Dividend Fundamentals
💵 Dow’s dividend yield currently stands at an eye-catching 10.42%, far exceeding the Basic Materials sector average.
💵 The company has a six-year streak of consistent dividend payments, with its latest quarterly dividend at $0.70 per share.
💵 However, the high payout ratio suggests that the dividend may be unsustainable if earnings continue to erode.
💵 Investors should be mindful that despite the appealing yield, the company’s ability to maintain these payouts faces real challenges amid weakening financials.
Dow’s near-term outlook remains clouded by operational headwinds and dividend uncertainty, making it a stock that demands close scrutiny from income-focused investors.