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Dow Chemical Cuts Dividend 1st Time Ever
By Zacks Investment Research on February 13, 2009 | More Posts By Zacks Investment Research | Author's Website
Dow Chemical (DOW) today cut its dividend by 64%. This is the first cut in 97 years and the first cut in the company’s history. This was signaled by the CEO on January 27, so it is not a surprise. With a dividend yield over 17%, compared to the Fed Funds near zero, this was not a surprise to the market (the yield is still over 6% after the cut).
In fact, this is part of a cash saving move involving a reduction of 5,000 employees and the closure of 20 plants. There is a need to preserve the company’s credit rating, should funds be needed to close the Rohm and Haas (ROH) acquisition, which is currently on hold and costing the company $90 million per month. This issue is still pending in the courts.
We believe that there will not be another cut, and that this dividend will serve as a floor for the stock.
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