Updated 3/11/25

LyondellBasell Industries (NYSE: LYB) is a major player in the chemicals and refining industry, producing everything from plastics to advanced materials used in manufacturing. It’s a well-established company with a market cap hovering around $24.76 billion, and it has built a reputation for rewarding shareholders with dividends.

For income investors, the high dividend yield is certainly appealing, but the bigger question is whether those payouts are sustainable. With earnings under pressure, a high payout ratio, and some macroeconomic concerns, it’s worth digging deeper before making any conclusions.

Let’s take a closer look at the company’s dividend, its financial health, and where it might be headed in the near future.

Key Dividend Metrics

💰 Dividend Yield: 7.00% (forward), 6.89% (trailing)
📈 5-Year Average Dividend Yield: 5.30%
💲 Annual Dividend: $5.36 per share (forward)
📆 Next Dividend Date: March 17, 2025
🔻 Ex-Dividend Date: March 10, 2025
🔄 Payout Ratio: 127.29%
📊 Dividend Growth: Has been consistent but faces sustainability concerns

Dividend Overview

LyondellBasell currently offers a strong dividend yield of 7.00%, which is well above its five-year average. That kind of yield is attractive, especially for those looking for steady income. However, the company’s payout ratio of 127.29% is a red flag.

A payout ratio over 100% means the company is paying out more in dividends than it earns in net income. That’s usually not sustainable for the long term unless earnings rebound or free cash flow improves significantly.

That being said, LYB has a track record of prioritizing shareholder returns. Dividend investors have been rewarded over the years, and the company has maintained its payouts even through economic downturns. The challenge now is whether it can continue to do so in the face of rising costs and a slowing economy.

Dividend Growth and Safety

LYB has been committed to paying dividends, but its growth rate has slowed in recent years. Investors who focus on dividend stability should keep an eye on a few key factors.

• The company has historically been a strong dividend payer, but the high payout ratio raises concerns.
• Free cash flow of $1.79 billion helps support dividend payments, but cash is getting tighter.
• Earnings are cyclical, meaning they rise and fall with market conditions, which can impact dividend stability.
• If earnings remain weak or decline further, LYB may have to adjust its dividend policy.

At the moment, the company’s dividend safety looks shaky. If profitability improves, the dividend will likely remain intact. But if economic headwinds persist, a reduction in payouts might be necessary.

Chart Analysis

Overall Trend

LyondellBasell (LYB) has been in a clear downtrend for the past several months. The stock has consistently traded below both the 50-day and 200-day moving averages, with the 50-day (orange line) sloping downward and staying well below the 200-day (blue line). This suggests sustained selling pressure and a bearish long-term outlook.

In recent weeks, LYB appears to have found some short-term stability, hovering around the mid-$70 range. However, the overall trend remains weak, and the stock has yet to show a strong reversal signal.

Moving Averages

The 50-day moving average has been acting as a resistance level, preventing the stock from making any meaningful recovery attempts. The 200-day moving average, which is often viewed as a long-term trend indicator, is also sloping downward. This confirms that the stock is still in a bearish phase.

For any real trend reversal to take place, the stock would need to reclaim its 50-day moving average with strong volume, which hasn’t happened yet. Until then, the path of least resistance remains to the downside or sideways at best.

Volume Analysis

Volume has remained relatively low in recent sessions, indicating that there isn’t strong conviction among buyers to push the price higher. However, there have been occasional spikes in volume, particularly during sharp drops, which suggests that selling pressure is still present.

The recent bars show some green volume, indicating that buyers are stepping in, but not in large enough numbers to significantly shift the trend. A breakout above resistance with high volume would be a more convincing sign of a potential trend change.

Relative Strength Index (RSI)

The RSI, which measures momentum, has been sitting in the lower range for a while. While it has started to move slightly higher, it remains below neutral levels, suggesting that the stock is still struggling to gain upward momentum.

A rising RSI could indicate that selling pressure is easing, but it needs to move above 50 to signal any real shift toward a stronger bullish trend. Right now, it suggests that the stock is in a weak position, though not necessarily in extreme oversold territory.

Recent Price Action

The past few candles indicate some hesitation in either direction. The stock is trading in a tight range, with some attempts to push higher but no strong follow-through. The most recent candles have small wicks, meaning buyers and sellers are fairly balanced for now.

A decisive move above resistance levels, backed by volume, would signal strength. On the other hand, if LYB falls below recent support levels, it could indicate another leg lower in the downtrend.

Analyst Ratings

LyondellBasell Industries N.V. (LYB) has received a mix of upgrades and downgrades from analysts, reflecting a range of views on its future performance. The average 12-month price target is around $86.20, indicating some potential for upside from current levels.

🔼 Upgrades

💰 RBC Capital – Upgraded to outperform, price target raised to $90 from $82
RBC Capital expressed confidence in LYB’s ability to manage economic challenges while maintaining steady cash flow. Analysts highlighted the company’s cost-cutting measures and stable demand for its chemical products as reasons for optimism.

📈 Wells Fargo – Maintained overweight, price target adjusted to $90 from $95
Wells Fargo remains positive on LYB’s long-term potential, pointing to its diversified revenue streams and improved operational efficiencies. While they slightly reduced the price target, they still see upside if market conditions stabilize.

🔽 Downgrades

📉 Piper Sandler – Downgraded to neutral from overweight, price target lowered to $95 from $112
Piper Sandler revised its outlook due to slowing growth in the global chemicals market, particularly in Europe and Asia. Analysts also noted potential policy changes in the U.S. that could impact the company’s raw material costs and exports.

⚖️ Barclays – Maintained equal weight, price target adjusted to $80 from $90
Barclays took a more cautious stance, citing concerns about macroeconomic uncertainty and weakening industrial demand. While they don’t see major downside risks, they believe LYB may struggle to generate significant earnings growth in the coming quarters.

The mixed ratings reflect both the opportunities and risks surrounding LYB. Some analysts believe the company is well-positioned to weather current challenges, while others remain cautious about external pressures that could limit its near-term growth.

Earnings Report Summary

LyondellBasell’s latest earnings report was a bit of a mixed bag, reflecting the challenges the company has been facing in a tough economic environment. The company reported a net loss of 603 million dollars for the fourth quarter of 2024, which comes out to 1.87 per share. That’s a sharp contrast from the same quarter last year when they posted a net income of 185 million dollars, or 56 cents per share. Revenue also dipped slightly, landing at 9.5 billion dollars, down from 9.93 billion dollars the year before.

A big reason for this loss was 811 million dollars in asset write-downs, mostly tied to their Olefins & Polyolefins and Advanced Polymer Solutions divisions. On top of that, costs associated with shutting down parts of their refining business added to the drag on earnings. Higher costs for natural gas and feedstocks didn’t help either, while weak product prices due to seasonally slow demand put more pressure on margins.

That said, it wasn’t all bad news. If you strip out those one-time costs, the company actually posted an adjusted profit of 75 cents per share, which was slightly better than what analysts were expecting. However, profitability in its core Olefins & Polyolefins – Americas business dropped to 496 million dollars, down from 604 million dollars last year. The Intermediates & Derivatives segment also saw a 5.6 percent decline in adjusted earnings, coming in at 250 million dollars.

For the full year, LyondellBasell managed to stay in the black with 1.4 billion dollars in net income, or 4.15 per share, but that’s still down from 2.1 billion dollars the previous year. Annual revenue slipped slightly to 40.3 billion dollars from 41.1 billion dollars. The company also pointed out that it faced roughly 734 million dollars in special costs throughout the year, mostly due to asset write-downs and expenses tied to winding down its refining operations.

On the cash flow side, things look a little better. The company generated 3.8 billion dollars in operating cash flow for the year, spending 1.8 billion dollars on capital projects while returning 1.9 billion dollars to shareholders through dividends and stock buybacks. As of year-end, they had 8 billion dollars in available liquidity, including 3.4 billion dollars in cash on hand.

Looking ahead, LyondellBasell is still pushing forward with its Circular and Low Carbon Solutions initiative. They broke ground on their MoReTec-1 facility in Germany, which will use advanced recycling technology to help meet the growing demand for sustainable plastics. The plant is expected to start running in 2026, and the company remains committed to its goal of producing 2 million metric tons of recycled and renewable polymers annually by 2030.

The overall takeaway from this report is that LyondellBasell is going through a tough period, but they’re still making strategic moves for the future. The next few quarters will be key in seeing whether their cost-cutting efforts and sustainability initiatives start to pay off.

Financial Health and Stability

Dividends are only as strong as the company behind them. LYB’s financials show both strengths and areas of concern.

• The company has $3.38 billion in cash, which provides some breathing room.
• Debt is a significant factor, with total obligations sitting at $13.07 billion. The debt-to-equity ratio of 103.82% is high, meaning leverage is a concern.
• The current ratio of 1.83 suggests the company has enough liquidity to cover short-term expenses.
• Profitability has weakened, with an operating margin of just 2.95% and a net margin of 3.38%.

While LYB’s cash position is solid, its high debt load and declining profitability could limit its ability to maintain dividend growth. If management can control costs and improve margins, financial stability will improve, but right now, there are risks.

Valuation and Stock Performance

LYB’s stock has struggled, down nearly 24% over the past year. This underperformance stands in contrast to the broader market, which has remained relatively strong.

• The stock trades at a forward price-to-earnings ratio of 12.03, suggesting it could be undervalued if earnings improve.
• A trailing P/E of 18.49 is on the high side, reflecting recent weakness in profits.
• The price-to-sales ratio of 0.62 indicates that the market isn’t assigning a high valuation to its revenue.
• Price-to-book sits at 1.99, which is lower than historical averages.

The valuation looks reasonable, but that depends entirely on earnings rebounding. Right now, the market seems to be pricing in concerns about lower profits and future uncertainty.

Risks and Considerations

Investing in a high-yield stock like LYB comes with risks, and it’s important to be aware of them.

• The company operates in a cyclical industry, meaning earnings can fluctuate based on global economic trends.
• A payout ratio above 100% is not sustainable long-term unless earnings recover.
• Debt levels are high, which could put pressure on cash flow and dividends.
• The stock has been underperforming, and investor sentiment remains cautious.
• Factors like inflation, rising interest rates, and trade policies can impact the company’s profitability.

LYB has shown resilience in the past, but the next few quarters will be crucial in determining its dividend stability. Investors should watch earnings reports closely to see if profitability starts improving.

Final Thoughts

LyondellBasell offers an attractive dividend yield, but sustainability is the big question. The 7.00% yield is tempting, but the payout ratio being over 100% suggests that unless earnings recover, the company may have to reconsider its dividend policy.

For those willing to take on some risk, LYB could be an interesting income play. If the company successfully navigates current challenges, it could continue rewarding shareholders. However, if profitability remains weak, adjustments may be necessary.

Dividend investors should keep a close eye on earnings trends, debt management, and overall market conditions before making any long-term decisions.