This Stock Is Up Over 50% Since Cutting Its Dividend
"Sometimes Dividend Cuts Are Needed To Propel Growth."
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Current Price: $65.61
Dividend/Yield: $2.76/4.1%
Portfolio Purpose: Income 💰
The past few years have been difficult for many global companies as inflation, weak demand, and geopolitical disruptions have weighed on margins and profitability. Companies with large international operations have been particularly exposed to these pressures.
LyondellBasell Industries (LYB) is no exception.
The global chemical producer, whose roots date back to the 1950s, has faced declining demand, margin compression, and global trade disruptions. As a result, management recently made one of the most difficult decisions any dividend-focused company can make: cutting its dividend.
Last month, LyondellBasell reduced its dividend by nearly 50%, something I cautioned investors about roughly six months ago.
Since then, however, the stock has performed surprisingly well. Shares have rallied more than 54%, suggesting the market may have already priced in the reset.
As a dividend-focused investor, I never like to see a company reduce its payout. But sometimes dividend cuts are necessary to preserve cash flow and position a company for long-term growth.
In this article, I examine LyondellBasell’s latest earnings, the company’s restructuring progress, and why the dividend cut could ultimately support a stronger future.
Previous Thesis 📖
I last covered LyondellBasell in December on Seeking Alpha.
At the time, the company had just reported Q3 results showing double-digit declines in both revenue and earnings year-over-year. The stock had fallen significantly, pushing the dividend yield close to 13%.
While a double-digit yield may appear attractive, it often signals elevated risk.
In my view, the market was already pricing in the possibility of a dividend reduction. I cautioned investors to avoid chasing the yield and instead wait for sequential operational improvements.
That caution proved warranted.
The dividend was ultimately cut in half, but surprisingly, the stock has rallied sharply since then. During the same period, the S&P 500 (SP500) has declined roughly 2%, highlighting just how much the market had already discounted the negative news.
Modest Improvements In The Latest Quarter 📁
LyondellBasell reported Q4 earnings at the end of January, showing some modest operational progress despite overall weak results.
• EPS: –$0.26 (missed estimates by $0.51)
• Revenue: $7.09 billion (beat estimates by $270 million)
However, both metrics were sharply lower compared to the previous year.
The company posted a net loss of $0.7 billion, compared to $1.4 billion in profit during the same quarter last year.
For the full year, earnings fell dramatically:
• 2025 EPS: –$1.70
• 2024 EPS: $6.40
Revenue also declined more than 25% year-over-year, falling from $9.5 billion as LyondellBasell continues restructuring its operations.
Despite the declines, certain segments showed early signs of stabilization.
The Olefins & Polyolefins – Europe, Asia, and International segment still reported negative EBITDA but improved compared to the previous year. The segment continues to face pressure from weaker pricing, lower volumes, and reduced polymer margins.
Meanwhile, the Advanced Polymer Solutions segment delivered higher cash flow and EBITDA.
However, this progress was offset by weakness in three other divisions:
• Olefins & Polyolefins – Americas saw margins fall to their lowest levels in nearly a decade due to inflation and rising costs.
• Intermediates & Derivatives experienced seasonal declines in oxyfuel margins.
• Technology declined year-over-year but improved sequentially thanks to higher license activity.
While challenges remain, the company appears to be moving in the right direction.
Management’s Cash Flow Improvement Plan 📝
Management’s primary focus is strengthening cash flow and improving the balance sheet.
The most significant step toward that goal was the 50% dividend reduction, lowering the quarterly payout to $0.69 per share.
This move ended a 14-year streak of dividend growth, during which the company had last raised the dividend by 7% in 2025.
Despite the reduction, LyondellBasell still offers a respectable 4.1% dividend yield, based on the new annual payout of $2.76 per share.
Beyond the dividend reset, management has taken several additional steps to improve financial flexibility.
Key initiatives include:
• 7% workforce reduction
• $800 million in cost savings (exceeding targets by $200 million)
• Divestment of four European assets
• Lower capital spending going forward
In 2025, the company generated:
• $2.3 billion in operating cash flow
• $2 billion returned to shareholders
• $1.9 billion in capital expenditures
Looking ahead to 2026, management plans to reduce CAPEX significantly to $1.2 billion, which should help support free cash flow and balance sheet improvement.
At the end of the quarter, leverage stood at 3.7x, up from 1.8x a year earlier.
To manage upcoming maturities, the company issued $1.5 billion in bonds to address debt due in 2026 and 2027. Importantly, LyondellBasell has no major debt maturities in 2028.
Liquidity remains strong, with $8.1 billion available, including $3.4 billion in cash.
Given these priorities, I expect management to keep the dividend stable for the foreseeable future while focusing on restoring financial strength.
If execution goes well, dividend growth could potentially resume by late 2027 or early 2028.
Has The Turnaround Already Been Priced In? 🤷🏾
Based on consensus estimates for 2026, LyondellBasell currently trades at a forward P/E of roughly 23.2x.
However, using a PEG ratio, the stock appears relatively attractive with a PEG of 0.56x, well below the sector median of 1.18x.
For comparison, DuPont de Nemours (DD) trades at a forward P/E of roughly 19.9x.
Despite these valuation metrics, the stock’s 23% rally over the past six months suggests much of the turnaround may already be reflected in the price.
For investors looking to initiate a position, patience may be warranted.
Ideally, I would look for an entry point closer to the low $50s or even the $40s, where the risk-reward profile becomes more attractive.
Risks To The Thesis ⚠️
While LyondellBasell appears to be making progress, several risks remain.
The most significant risks include:
• Geopolitical tensions
• Global economic weakness
• Inflationary pressures
• Weak industrial demand
If geopolitical conflicts persist or escalate, inflation could reaccelerate, putting additional pressure on chemical margins.
On the other hand, if conflicts subside and interest rates decline as expected, LyondellBasell could benefit from improving demand and lower financing costs.
Bottom Line ✅
LyondellBasell’s dividend cut was undoubtedly painful for income investors.
However, the move may have been necessary to preserve cash flow and support the company’s long-term restructuring efforts.
Management is actively reducing costs, divesting weaker assets, and lowering capital expenditures to strengthen the balance sheet.
While the company appears to be on the right track, the recent share price rally suggests that much of the turnaround may already be priced in.
For now, I continue to maintain a hold rating, preferring to wait for further operational improvements or a more attractive entry point.
Do you think another dividend cut is on the table in 2026? Let me know in the comments.
Happy Investing!
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Not financial advice. For educational purposes only. I am not a licensed professional. Do your own due diligence.
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