The global chemical industry is experiencing one of its longest slumps in decades. Oversupply, fierce competition, and sluggish demand are dampening profits across every major region, with production growth expected to reach only about 3% for the year. Cost pressures are also rising due to tariffs and expensive raw materials.
In the middle of these tough conditions, July 24 marked a rough day for Dow (DOW), as the stock dropped 17.45%, its worst single-day slide in five years. This sharp drop followed the company’s decision to halve its quarterly dividend, reducing it from $0.70 to $0.35 per share.
This big move came alongside a tough second-quarter loss of $0.42 per share, which was more than three times worse than what Wall Street had been expecting. Dow’s shares are now trading near a 52-week low of $24.32, reflecting the pressure facing chemical makers across the world.
Dow has long been seen as a reliable choice for steady dividends, but this latest move brings up an important question: Is this a needed reset for a struggling company that’s now facing weaker earnings for longer, or does it point to bigger trouble ahead? Let’s take a look.
Dow (DOW) is a leader in materials science, transforming raw materials into essential products used in packaging, infrastructure, and consumer goods. Over the past year, DOW’s stock price has dropped 54.3% with a 39% loss just since the start of the year.
Valuations have shot up as profits have slipped, with Dow’s forward price-earnings ratio now at 108.9x, much higher than the industry’s 16.31x average.
Dow’s most recent financial results lay out what’s behind the sweeping dividend cut. Net sales fell 7% year-over-year to $10.1 billion and volume was down across most regions, while local prices also dropped in every segment. Softer revenue, squeezed margins, and heavy restructuring costs all added up to a GAAP net loss of $801 million and an operating EPS loss of $0.42. The cash flow story was just as tough, with operating cash flow from continuing operations turning negative and dropping $1.3 billion from last year.
Two examples of how Dow is trying to stay relevant are its goals of making plastic products more eco-friendly and its teaming up with others on recycling. One example is its work with Liby to use more recycled plastic in everyday goods, matching what buyers and brands want in packaging that’s better for the environment. Dow has also rolled out the INNATE TF 220 Resin, which helps create strong, recyclable plastic films.