Boston, MA 04/14/2014 (wallstreetpr) – The Dow Chemical Company (NYSE:DOW) is a petrochemical and specialty-chemical organization with market value of $57 billion. Activist investor Dan Loeb holds position in the company, and his recommendation is that the company split into specialty-chemical and petrochemical as two separate companies.
However, such a move may not be very urgent or even popular given that the company is performing well as a conglomerate. The ability of the management to effectively balance between the specialty-products and petrochemical with an eye on high-growth, high-margin markets has helped the company to record compelling revenue and earnings growth. Moreover, the stock price has also had decent trend supported by the expanding free cash flow position and strong dividend payout.
The company’s share prices jumped 30 percent last year on the back of 91 percent increase in operating cash flow. Moreover, the company also managed to reduce its debt position significantly from $16.67 billion in 2012 to $12.02 billion, in 2013, suggesting 28 percent drop in debt. The past year also witnessed the company’s profit margins going up 1.5 percent and the management expect the trend to continue in the current year.
Focus on profit growth
The Dow Chemical Company (NYSE:DOW) can be seen lessening its position in low-growth, low-margin businesses. Instead, the company is investing more in high-growth markets with growing attention to the foreign markets. Rebalancing the portfolio to expand investment in promising markets is expected to help the company improve its cash flow position and, therefore, increase its value return to shareholders.
Increasing shareholder value
The company plans to increase the amount of profit that it shares with shareholders. That will be achieved by increasing dividend payout and stock repurchase program. Recently the company increased its quarterly dividend by 16 percent to 37 cents per share and the management expects to do more in adjusting dividend upwards.
As for stock buyback, the company tripled its buyback program in January for use in the current year. With $4 billion under stock repurchase program, the company seeks to buy back about 7 percent of its outstanding shares. If that is done, The Dow Chemical Company (NYSE:DOW) will have effectively offset its 2009 shares dilution.
