DOW Stock: Investors Ignoring This 8%-Yielding Blue-Chip Stock?
April 2, 2025
Is the Market Missing Out on DOW Stock?
The stock market doesn’t always get it right. In fact, history is full of examples where Wall Street mispriced great companies—only for patient investors to be able to cash in big later.
Don’t think that’s true?
Well, just look at Apple Inc (NASDAQ:AAPL) in the early 2000s, McDonald’s Corp (NYSE:MCD) after the 2008 financial crisis, or even energy stocks a few years ago. Most investors were too focused on short-term struggles and ignored long-term potential.
Could the same thing be happening with Dow Inc (NYSE:DOW) right now?
DOW stock has sold off significantly since late 2024. As the key stock indices dropped in late January and early February of this year, the selling in DOW stock got worse. In the midst of it, a great opportunity could be in the making for income investors.
What Does Dow Inc Do?
Headquartered in Midland, Michigan, Dow is one of the biggest names in the materials science industry. The company produces essential chemicals and plastics used in everything from packaging and infrastructure to mobility and consumer applications in the U.S., Canada, Europe, the Middle East, Africa, India, the Asia-Pacific, and Latin America.
Dow Inc operates through three business segments: Packaging & Specialty Plastics; Industrial Intermediates & Infrastructure; and Performance Materials & Coatings.
The Packaging & Specialty Plastics segment of Dow supplies materials used in food packaging, consumer goods, and industrial applications. Its offerings include ethylene, propylene, polyethylene, aromatic products, ethylene derivatives, and ethylene propylene diene monomer rubber.
The Industrial Intermediates & Infrastructure segment of the company offers chemicals used in the construction, automotive, and energy industries, such as polyurethanes, aromatic isocyanates, fully formulated polyurethane systems, chlor-alkali, vinyl, construction chemicals consisting of cellulose ethers, redispersible latex powders, acrylic emulsions, coatings, adhesives, sealants, elastomers, and composites.
The Performance Materials & Coatings segment of Dow provides materials for paints, coatings, and silicones. It also engages in the property and casualty insurance and reinsurance businesses. (Source: “Profile,” Yahoo! Finance, last accessed March 30, 2025.)
DOW Stock’s Down, But Financial Performance Remains Strong
Despite market volatility, Dow’s products remain in demand. There’s cyclicality in the company’s financials, but it plays a critical role in industries that aren’t going away anytime soon. So, financials will improve as the overall economic conditions improve.
Dow recently reported that its fourth-quarter 2024 revenue came in at $10.4 billion, down two percent year over year. It also posted a small net loss of $35.0 million, or $0.08 per share. This really spooked investors, so they ditched DOW stock.
But here’s the thing: income investors need to pay attention to details and look beyond the headline figure.
Dow is already taking steps to address these short-term challenges.
The company’s management recently announced a $1.0-billion cost-cutting initiative. These actions could help stabilize earnings and set the company up for growth…and all of this could lead to a windfall for those who own DOW stock.
It is also important to note that Dow continues to generate a decent amount of cash flow from operations. In the entire year of 2024, the company generated $2.91 billion from operating activities. Remember: cash flow is important because it’s where the dividends come from.
What’s ahead in 2025 for Dow?
Jim Fitterling, Dow Inc’s chair and chief executive officer, said, “We remain confident that Dow will benefit from the completion of our near-term incremental growth projects and an enhanced focus on operational discipline in 2025. In addition, we are optimistic that we will see further demand growth in attractive end markets such as packaging, energy and electronics.” (Source: “Dow reports fourth quarter 2024 results,” Dow Inc, January 30, 2025.)
Dividend Investors Pay Attention to DOW Stock
If you’re an income investor, DOW stock is really exciting. The recent sell-off has made it very attractive.
Investors who own DOW stock have been getting paid $0.70 per share quarterly since 2019. This translates to $2.80 on annual basis and an inflation-crushing dividend yield of over eight percent.
It’s interesting to note that DOW stock is a constituent of the S&P 500. At the time of writing, the S&P 500 has a yield of 1.27%. So, with DOW stock, investors get a 6.4 times greater yield than the S&P 500.
Moreover, the five-year average dividend yield on DOW stock is around 5.26%. With a dividend yield of over eight percent at the moment, investors are really getting a great deal.
Chart Courtesy of StockCharts.com
The Lowdown on DOW Stock
The market doesn’t always price stocks correctly in the short term—there’s a lot of noise, speculation, and pure emotional trading. Right now, DOW stock looks like one of those overlooked opportunities. It’s a high-yielding, blue-chip stock selling at a discount that has excellent long-term upside potential.
DOW stock is also loved by institutional investors. As per the most recent data, over 1,800 institutional investors hold 68.03% of all outstanding shares. The three biggest holders of DOW stock are The Vanguard Group, BlackRock Inc, and State Street Corp. (Source: “Holders,” Yahoo! Finance, last accessed March 30, 2025.)
