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One of the world’s largest chemical companies just raised its dividend 17%. And despite being in the S&P 500, I bet you’ve never even heard of it.
Just because a company pays a dividend does not mean that its stock is worth owning.
Is the dividend safe? Is the company raising its dividend? Does it have other shareholder-friendly policies? These are the most important questions for investors to answer before purchasing shares of a dividend stock.
It’s not every day that you come across the kind of stock with a safe dividend that has been rising over time and is matched by other shareholder-friendly practices.
LyondellBasell Industries (NYSE: LYB) is that kind of stock.
The company is part of the S&P 500 but it is certainly not a name-brand company. The chemical giant is based in Houston, Texas and actually went through bankruptcy in 2009 after being laden with debt following a large merger. The company emerged from bankruptcy protection in 2010 stronger than ever.
LyondelBasell manufactures industrial chemicals, refines oil to produce fuels including jet fuel and gasoline and also produces all kinds of plastics. Its products are used in many applications that affect our daily lives, though most of us don’t even know the company exists.
Often times, these kinds of companies make for some of the best investments.
LyondellBasell is up 16% already this year while the S&P 500 has only risen a little over 1.5%, and 2014 has been no fluke. The stock is up over 250% since its 2010 IPO while the S&P 500 has risen just shy of 60% during the same period.
Top Industrial Chemical Company Crushes the Market
Source: Yahoo! Finance
The story of its dividend is also a happy one.
The company began paying dividends in 2011, less than a year after reemerging from bankruptcy. Though that first dividend was only $0.10 per share, the most recent dividend was $0.60 per share. Plus, in that time the company has also paid two special dividends. The first special dividend amounted to $4.50 per share. The second, paid out at the end of 2012, was $2.75 per share.
LYB seems committed to shareholder friendly policies. So it came as no surprise when it announced last week that its next dividend, to be paid on May 12, will be $0.70 per share. This is an increase of 17% over the dividend paid earlier this year.
On top of the growing dividend, the company increased its stock repurchase program by an additional 10% of shares outstanding.
This statement by CEO Jim Gallogly nicely summarizes the LYB stock’s shareholder-friendly stance.
The company has already repurchased approximately 46 million shares to date and expects to have repurchased the entire 10% of the original authority given by shareholders in 2013 by the end of May 2014. This new share repurchase program and the increase in the regular interim dividend is reflective of our outlook, capital growth program, strong free cash flow profile and our commitment to returning cash directly to our shareholders via share repurchases and dividends.
Put in simpler terms, the company plans to have repurchased 10% of its own stock in approximately one year and will immediately begin repurchasing the next 10% of its shares.
With a strong financial outlook and cash flow, the company plans to keep increasing its dividend and repurchasing stock as much as possible.
It’s those kinds of statements, backed up by its recent actions and its positive track record, that make LyondellBasell a terrific buy for investors seeking dividend growth opportunities.
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