Two Chemical Giants Cut Their Dividends. One Kept Raising. Here’s What Income Investors Should Know.
Dow and LyondellBasell slashed their dividends while Air Products kept raising its payout, and the reason comes down to a structural difference that most yield screens completely miss.
Dow (NYSE:DOW | DOW Price Prediction) and LyondellBasell (NYSE:LYB) both cut their dividends after a long slump in petrochemicals. Air Products (NYSE:APD) kept raising its payout, and its quarterly dividend now stands at $1.81. All three are large chemical companies, but they earn money in very different ways, and for anyone living on dividend checks that difference matters more than the reported yield. Below we check each payout against free cash flow, earnings, and the balance sheet.
Dow: Half the Dividend, Now Backed by Cash Flow
Dow paid $0.70 per quarter for six years. Its records show that amount on every payment from the 2019-05-30 ex-dividend date through 2025-05-30. With the declaration dated 2025-07-24, the board cut the payout to $0.35. That rate has held through the most recent payment on 2026-09-11.
It amounts to $1.40 a year. With the shares at $29.95, the forward yield is about 4.67%. The yield is high, though well short of ultra-high territory.
Dividend Safety Read
The smaller dividend is now covered by cash. In the second quarter, Dow generated $692M of free cash flow and paid $253M in dividends. In the first quarter, it produced $621M of free cash flow against $252M in dividends. Across the first half, free cash flow covered the payout about 2.6 times. Earnings are lower. Trailing diluted EPS is -$1.88, but second-quarter adjusted EPS came in at $1.44, beating the $1.28 estimate, on revenue of $12.09B.
On the balance sheet, management reported about $14 billion of available liquidity and no substantial debt due dates until 2029. Cash stood at $3.97B. Total liabilities are still large at $44.2B, compared with $17.4B of equity. Chief Financial Officer Jeff Tate said, “One of the things that we are going to continue to stay committed to is our investment grade credit profile.”
Bull Case for Income Investors
Dow is restructuring its cost base. The company raised its full-year self-help target to more than $1.3 billion and still sees a $2 billion total opportunity by the end of next year. Investors have responded: the stock is up 32.4% year to date, and the shares trade at about 14 times forward earnings. The reduced dividend is now small enough for cash flow to cover it.
Key Risk
The second quarter looks like a peak. Third-quarter EBITDA was guided to about $1.7 billion, down from $2.3 billion in the second quarter, and the company said excess cash goes to paying down debt first. Shareholders should not expect a raise soon.
LyondellBasell: A Smaller Payout With Only One Strong Quarter Behind It
LyondellBasell had raised its dividend steadily for years, from $1.05 per quarter in 2020 to $1.37 in 2025. The last payment at that rate had a 2025-12-01 ex-dividend date. The next declaration, dated 2026-02-19, set the payout at $0.69, and it has stayed there since.
Screens that use trailing payments still show a 6.87% yield, because they count dividends paid before the cut. The figure that matters for your income is the forward rate. At $2.76 a year and a price of $63.98, LyondellBasell yields about 4.31%. The yield is high, but below the ultra-high mark.
Dividend Safety Read
Coverage has been uneven. In the second quarter, operating cash flow was $752M and capex was $270M, leaving about $482 million of free cash flow. That covered the $224M dividend roughly 2.15 times. The first quarter went the other way: operating cash flow was -$269M because of a seasonal working-capital build, so first-half free cash flow came to about -$56 million. Trailing diluted EPS is -$0.85, dragged down by an $842M after-tax charge on the European sale.
The company ended the quarter with $2.6 billion of cash and $7.1 billion of liquidity. Management ranks the dividend just below the credit rating. As the CFO put it, “Investment grade continues to be paramount… Our dividends as well continue to be an important piece of it.”
Bull Case for Income Investors
LyondellBasell has become a smaller, leaner company. It has cut headcount by about 3,400 employees or 17% of its workforce and expects its cash improvement plan to add $500 million of cash flow by the end of 2026. Second-quarter adjusted EPS of $4.30 beat the $3.43 estimate, and the stock trades at about 9 times forward earnings.
Key Risk
A temporary event drove the second quarter. Management said the Middle East conflict interrupted production and trade across the industry, and North American crackers ran at about 95% as a result. Third-quarter guidance calls for operating rates of about 85%. As that boost fades, cash coverage gets tighter.
Air Products: Industrial Gases Kept the Raises Coming
Air Products went the other way. Starting with the 2026-04-01 ex-dividend date, it raised its quarterly payout from $1.79 to $1.81. Its dividend records show a higher quarterly rate in every year from 1999 through 2026, with no cuts. At $7.24 a year and a price of $300.63, the forward yield is about 2.41%. That is the lowest yield of the three, and it has the best record behind it.
Why Industrial Gases Behave Differently
Dow and LyondellBasell sell polyethylene and other commodity chemicals. Their prices rise and fall with global supply, so their profits swing with the cycle. Air Products supplies oxygen, nitrogen, and hydrogen under long-term contracts, often from plants built right next to the customer’s facility. That makes its cash flow act more like a utility’s. Its adjusted operating margin reached 25.6% in the fiscal third quarter, while commodity producers were still working through overcapacity.
Dividend Safety Read
The company guides fiscal 2026 adjusted EPS to $13.39 to $13.49. Against that range, the annualized dividend takes up about 54% of earnings. The CFO said “year to date, we are free cash flow positive”, and the company has returned $1.2 billion through dividends so far this fiscal year. Net debt runs 2.1 times EBITDA, and management wants to work back to a higher credit rating over time.
Bull Case for Income Investors
Chipmakers are driving the growth. Air Products secured more than $1.5 billion of project wins in the last six months, and close to two-thirds of its opportunities are in electronics. Management has also said clearly that raises will continue: “We will want to invest in high return projects first and foremost, continue to increase our dividend, and share buybacks will become part of that program.” The stock is up 190.18% over ten years and trades at about 20 times forward earnings.
Key Risk
Leaving the clean-energy projects was expensive. About $2.9B of pre-tax charges drove fiscal third-quarter GAAP EPS to -$6.47. Investors who sized up this stock on its old capex plans now have to trust management’s discipline on new projects.
What Income Investors Should Watch Next
Dow and LyondellBasell both cut their payouts to levels their cash flow can carry. For Dow, watch whether free cash flow keeps covering the dividend as EBITDA moves toward its third-quarter guidance. For LyondellBasell, watch whether cash flow holds up without the Middle East supply disruption. Air Products earned its long record of higher annual payouts with contracted cash flow. For Air Products, keep an eye on the payout ratio as the electronics backlog comes online.
Contact [email protected] for any questions or corrections.
Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
