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Stocks to Buy: 5 Reasons Value Investors Should Consider Dow Chemical Today

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Stocks to Buy: 5 Reasons Value Investors Should Consider Dow Chemical Today Image source: Dow Chemical


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Diversity: Helps reduce earnings volatility 1


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Diverse businesses Performance plastics Performance materials & chemicals Infrastructure solutions Consumer solutions Agricultural sciences Dow operates five business segments: Source: Company website


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Diverse end markets Dow’s broad product portfolio serves several key industries across 180 countries Source: Company website


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Innovative leadership: A compelling competitive advantage 2


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Full steam ahead Dow demonstrated its innovative leadership last year, with More than 5,000 new product launches 635 new U.S. patents – a record for the company


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Solid foundation for the future Dow’s patent-advantaged sales are growing rapidly – they now make up nearly a quarter of its total revenue Source: Company website


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Strong operational performance and financials 3


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Growing profits Dow’s net profit has more than doubled on flat revenue during the past five years


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Rapidly rising EBITDA* *EBITDA = Earnings before interest, tax, depreciation, and amortization. Figures on a trailing 12-month basis. Chart source: Dow Q2 2015 earnings presentation.  


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How is Dow pulling it off? Through a threefold strategy Increased focus on high-margin value-added products Target investments to exploit lower feedstock (crude oil, natural gas) costs Divesting non-core operations to drive down costs


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Strong financials Key stats as of June 30, 2015 Cash and cash equivalents: $6.2 billion Long-term debt: $17.8 billion Interest coverage ratio: 7.9 Free cash flow (TTM*): $3.2 billion *TTM = Trailing twelve months


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Point to note Dow’s cash flows have grown while debt has declined during the past five years


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Big-ticket growth plans = solid foundation for the future 4


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Investing for growth Major growth projects underway: Potential to add more than $3 billion in annual EBITDA Source: Dow Chemical 2014 Annual Report


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Investing for growth Key projects include Sadara: Dow-Saudi Aramco joint venture to build the world’s largest petrochemical facility New ethylene, propylene production plants in Texas


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Impressive shareholder returns 5


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Value for shareholders Dow demonstrated its commitment to shareholders in 2014, when it Increased its dividend twice Expanded its share repurchase program to $9.5 billion from $4.5 billion


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Growing dividends Dow’s dividend has grown at a compounded rate of 19% since 2009 Source: Dow Chemical 2014 Annual Report


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Higher buybacks Share buybacks have ramped up, too Source: Dow Chemical 2014 Annual Report


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To sum up Dow Chemical measures up on key counts: operational performance, financials, growth catalysts, and shareholder returns. So any dip in its share price could present an opportunity for value investors.


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This Could Be The Next Billion-Dollar iSecret


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