Near the end of July, storied chemical company Dow (DOW -1.68%) chopped its quarterly dividend in half from $0.70 per share to $0.35. To say investors weren't happy about this would be understating the case; since then, Dow's share price has fallen by almost 7% against the incremental rise of the S&P 500 (^GSPC -0.40%).
Dow is a longtime dividend player, and it's refusing to give up on its payout entirely. Read on to find out the share count required to clock $1,000 worth of those lowered dividends yearly.
Why Dow is down
To cut directly to the chase, the answer is 715 shares. At the stock's currently reduced price, that would mean a total spend of just under $16,824.
Image source: Getty Images.
A 50% dividend cut is hard to swallow, but this is mitigated by the resulting yield, which now stands at slightly under 6%. That's extremely high for any stock on the exchange -- all the more given Dow's long history and prominence as a publicly traded company.
Yet this flags a high degree of risk. The chemical industry in general is struggling mightily, with weakening global demand and the lingering effects of oversupply that occurred near the start of the 2020s, among other factors.
Better times sorely needed
Dow's slump is apparent, with second-quarter sales sliding by 7% year over year and the bottom line flipping to a non-GAAP (generally accepted accounting principles) adjusted loss of $0.42 per share from the year-ago profit of $0.68. With that kind of showing, the company is in batten-down-the-hatches mode. Factories have been shut and capital expenditures lowered to shore up finances.
The question is: When will the industry recover? There's only so many cost-savings measures a producer can implement; customer demand must bounce back. With so much uncertainty, it's not clear when that might happen.
So with Dow, if you're a believer in the chemical business changing course sooner than later, this is an irresistible buying opportunity. For anyone more doubtful, though, the stock might be better off avoided.
