Updated 3/6/25
Ashland Inc. (NYSE: ASH) is a well-established specialty chemicals company with a diverse portfolio serving industries like pharmaceuticals, personal care, food and beverage, and coatings. Known for innovation and a focus on sustainability, Ashland has built a strong position in high-margin markets.
For dividend investors, ASH offers a steady payout backed by a manageable payout ratio. While it doesn’t have the highest yield in the market, its commitment to dividend growth makes it a potential fit for income-focused portfolios. But with the stock down significantly over the past year, does it present a buying opportunity, or are there risks to consider? Let’s break it down.
📊 Key Dividend Metrics
💰 Dividend Yield: 2.73% (above its 5-year average of 1.51%)
📈 5-Year Dividend Growth Rate: 9.4%
🛡 Payout Ratio: 40% (suggesting sustainability)
📆 Ex-Dividend Date: February 28, 2025
📅 Next Dividend Payment Date: March 15, 2025
📊 Forward Annual Dividend Rate: $1.62 per share
🚀 10-Year Dividend CAGR: ~10%
Dividend Overview
Ashland has maintained a reliable track record of dividend payments. With a 2.73% forward yield, it provides a moderate income stream that looks more attractive now due to the stock’s recent decline. Historically, the company’s average yield was just 1.51% over the last five years, meaning the current level is elevated.
The payout ratio sits at 40%, which is a comfortable range. This indicates that Ashland has room to continue increasing dividends without overextending itself. The company generates solid free cash flow, with over $253 million in levered free cash flow, further reinforcing the sustainability of its dividend policy.
Dividend Growth and Safety
Dividend growth has been a consistent strength for Ashland. Over the past decade, it has increased its dividend at an average annual rate of about 10%. Recent hikes have been more measured, coming in around 5%, reflecting a slightly more cautious approach.
With a payout ratio that leaves room for flexibility, Ashland appears positioned to continue raising dividends. However, declining revenue could become a challenge if it persists. The most recent earnings report showed a 14.4% year-over-year decline in revenue, which could put pressure on future dividend increases.
Ashland has a history of prioritizing shareholder returns, but maintaining that track record will depend on stabilizing its financial performance. For now, the dividend looks safe, but growth rates may slow if earnings don’t improve.
Chart Analysis
Overall Trend
The chart for Ashland Inc. (ASH) shows a steady decline over the past several months. The price has remained in a clear downtrend, with both the 50-day moving average (orange line) and 200-day moving average (blue line) sloping downward. The 50-day moving average crossed below the 200-day moving average months ago, forming a death cross, which often signals extended bearish momentum.
Recent Price Action
The stock has recently attempted to find support in the $56.50 – $59.50 range, showing some buying interest at these levels. There has been a slight bounce off recent lows, but overall, the trend remains weak. The moving averages are acting as resistance, meaning any upward movement is likely to face selling pressure.
Volume and Market Activity
There are noticeable spikes in volume, particularly in late August, September, and in recent sessions. These surges in activity could indicate increased institutional involvement or retail traders reacting to major price movements. The most recent increase in volume near the lows might suggest capitulation selling, where weaker holders exit while stronger buyers step in. However, without sustained buying, this could also signal a temporary pause before further downside.
Momentum Indicators
The Relative Strength Index (RSI) at the bottom of the chart is trending near oversold territory. This can sometimes indicate a potential short-term bounce, but momentum has been weak for an extended period. Without a clear shift in buying strength, there is no strong confirmation of a reversal.
Key Levels to Watch
From a technical perspective, the stock remains in a firm downtrend, with lower highs and lower lows continuing to define its movement. A break above the 50-day moving average could suggest a potential shift in momentum, but for now, the prevailing trend remains downward.
Analyst Ratings
📈 Upgrades
🟢 Wells Fargo & Company – Upgraded Ashland from Equal Weight to Overweight, raising the price target from $100 to $112. Analysts pointed to expected improvements in operational efficiency and potential growth in high-margin sectors as reasons for the upgrade.
🟢 Jefferies Financial Group – Shifted Ashland from Hold to Buy, increasing the price target from $100 to $126. The firm highlighted Ashland’s strategic focus on specialty chemicals and the potential for margin expansion as key drivers for the upgrade.
📉 Downgrades
🔴 JPMorgan Chase & Co. – Downgraded Ashland from Neutral to Underweight, lowering the price target from $81 to $68. The downgrade was based on concerns over declining revenue and difficulties in maintaining profit margins.
🔴 Seaport Research Partners – Adjusted Ashland from Buy to Neutral, removing the previous price target. Analysts expressed caution about the company’s ability to outperform in a challenging environment for chemical manufacturers.
🎯 Consensus Price Target
The 12-month average price target for Ashland stands at $93.50, with projections ranging from $68 on the low end to $126 on the high end. This implies a potential upside of approximately 65.18% from the stock’s recent price of $56.61. However, the wide range of targets suggests differing views on the company’s ability to navigate current market conditions.
With some analysts optimistic about operational improvements and others wary of broader industry pressures, Ashland remains a stock with mixed sentiment, reflecting both potential opportunities and ongoing risks.
Earnings Report Summary
Ashland Inc. recently shared its latest earnings report, giving investors a closer look at how the company is performing and where it’s headed. The numbers paint a picture of a company making strategic moves to strengthen its core business, but also dealing with a few challenges along the way.
Steady Sales and Improved Profitability
For the quarter, Ashland reported $522 million in sales, which was up 1% from the same time last year. While that’s not a huge jump, it does show some stability in demand across its key markets. The company’s income from continuing operations came in at $19 million, or $0.39 per diluted share, which is in line with expectations.
A bright spot in the report was adjusted earnings, which strip out certain expenses to give a clearer picture of profitability. Adjusted income from continuing operations hit $61 million, or $1.26 per diluted share, while adjusted EBITDA climbed 68% from the previous year to $124 million. That’s a strong gain, showing that Ashland is finding ways to be more efficient despite market pressures.
How the Business Units Performed
Not all parts of the business moved in the same direction. The specialty additives segment saw a 4% dip in sales, partly because the company is reshaping its product portfolio in this space. While that meant some short-term revenue pressure, the long-term goal is to focus on higher-margin opportunities.
On the flip side, the personal care division continued to shine, marking its fourth straight quarter of over 25% year-over-year EBITDA growth. Strong demand for skin and hair care products has been a key driver, and Ashland appears to be capitalizing on this trend.
Strategy and Challenges
One of the biggest moves of the quarter was the sale of Ashland’s nutraceuticals business to Turnspire Capital Partners. This was a strategic decision to focus more on high-margin, consumer-facing markets like pharmaceuticals, personal care, and coatings.
Not everything went smoothly, though. The company ran into some operational issues while upgrading its hydroxyethyl cellulose production, which ended up costing about $5 million in operating results. Slower demand for coatings in China also weighed on results in that segment.
Looking Ahead
Despite the bumps in the road, Ashland is staying focused on refining its business model and targeting high-growth areas. The company is making adjustments to ensure long-term profitability, and while there are still challenges ahead, it seems committed to positioning itself for future success.
Financial Health and Stability
For dividend investors, financial strength is a key factor. Ashland’s balance sheet presents a mix of positives and concerns.
The company has a strong liquidity position, with a current ratio of 2.52, meaning it has more than enough assets to cover short-term liabilities. Free cash flow remains healthy, supporting the dividend.
Debt is a moderate concern. The company carries $1.42 billion in debt, leading to a debt-to-equity ratio of 54.63%. While not excessive, it does limit financial flexibility. Additionally, Ashland’s return on equity is just 0.18%, signaling inefficiency in generating profits.
The biggest red flag is declining revenue. With a 14.4% drop year-over-year, Ashland needs to stabilize its top line to maintain long-term dividend growth. If revenue continues to shrink, earnings could be impacted, making future dividend hikes more difficult.
Valuation and Stock Performance
Ashland’s stock is currently trading at just 1.08 times book value, which is relatively low compared to historical levels. The company’s forward price-to-earnings (P/E) ratio of 13.14 suggests the stock is inexpensive relative to expected earnings.
However, valuation alone doesn’t tell the full story. The stock has dropped 38% from its 52-week high of $102.50, significantly underperforming the broader market. While this decline could signal an attractive entry point, investors need to consider whether the underlying business challenges justify the lower stock price.
One concern is the enterprise value-to-EBITDA ratio of 57.98, which is quite high for a company experiencing revenue contraction. While the stock looks cheap based on traditional metrics, its declining fundamentals warrant caution.
Risks and Considerations
Like any investment, Ashland comes with its risks.
Revenue decline is a major concern. The 14.4% year-over-year drop could indicate deeper business challenges that may take time to resolve. If revenue continues to decline, earnings could weaken, limiting the company’s ability to raise dividends.
Debt levels are another factor to monitor. While not alarmingly high, $1.42 billion in debt does limit financial flexibility. If cash flow weakens, debt repayment could take priority over dividend growth.
The stock’s weak performance is also worth noting. With a 38% drop from its highs, investors must assess whether this is a temporary setback or a sign of more serious long-term issues.
Lastly, Ashland operates in an industry sensitive to economic cycles. If industrial demand slows or raw material costs rise, profitability could be impacted.
Final Thoughts
For dividend investors, Ashland presents an interesting mix of strengths and challenges.
On the positive side, the company offers a 2.73% yield, a strong dividend growth history, and a reasonable payout ratio. The stock appears undervalued, trading well below its previous highs.
However, risks exist. Declining revenue, moderate debt, and weak stock performance raise questions about the company’s near-term outlook. While the dividend remains safe for now, growth may slow unless earnings improve.
For those willing to take on some risk, Ashland could be an attractive opportunity at current levels. But for more conservative investors, it may be worth waiting for signs of revenue stabilization before making a move.
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