Money bag with “Dividend” written on it.
The chemical industry has faced significant challenges recently. A decline in global demand combined with high raw material and energy costs is squeezing the profits of petrochemical manufacturers. In light of this situation, LyondellBasell (LYB), a major player in the sector, announced a notable cut to its dividend. The Board revealed that quarterly payments will now be $0.69, which is about 50% less than the $1.37 from the previous quarter. This adjustment points to a particularly prolonged economic slump in the industry.
For investors relying on income, such a halving of dividends is definitely disheartening. It’s worth delving deeper into the reasons behind this decision and why it might be more strategic than it first seems.
About LyondellBasell Stock
LyondellBasell ranks among the top global producers of chemicals and plastics. By revenue, it’s one of the largest polymer producers, specializing in polyethylene and polypropylene as well as refining processes. The company’s integrated operations—from petroleum refining to advanced materials manufacturing—set it apart in its field. With over 25 facilities worldwide, it showcases not only substantial scale but also leadership in technology, particularly in producing polyolefins.
Interestingly, LYB has several strategic moves in the pipeline. There’s a plan to sell four units in Europe by the second quarter of 2026 to streamline its portfolio and raise capital. Additionally, construction is advancing on the MoReTec-1 plastic fuel recycling facility in Germany, set to start operations in 2027. Alongside ongoing workforce reductions of 7% by 2025, these actions highlight management’s commitment to core business functions and improving financial health. There’s been a conscious decision to refrain from major acquisitions lately, focusing instead on cost management and maintaining an investment-grade balance sheet.
The stock price of LYB saw a substantial decline in 2025—a drop of about 27% over the year due to plummeting chemical margins and disappointing earnings that exacerbated the situation. However, by late February 2026, the stock had rebounded by approximately 30% year-to-date, influenced by news of cost reductions and speculation that the worst had passed. Still, the stock has not fully recovered to its previous highs, given the prevailing market downturn throughout much of 2025.
From a valuation standpoint, LYB appears appealing. Its EV/Sales ratio stands at 0.8, well below the sector median of 2.1. Moreover, the dividend yield is an attractive 9.46%, significantly surpassing the sector average of 1.6%, indicating a strong potential for returns. Overall, LYB seems reasonably priced across various measures, with a balance sheet that suggests it’s not overly inflated in value.
Dividend Cut Announcement
On February 20, the board of LYB declared a new quarterly dividend of $0.69 per share, marking a significant 50% reduction from the previous $1.37. Management referred to this as a necessary “recalibration” in light of the extended downturn in the industry. CEO Peter Vanacker mentioned that, despite the economic challenges, the company still aims to return $2 billion to shareholders in 2025. However, the move to cut the dividend is intended to preserve cash and improve the balance sheet while also allowing for investment in cost-reduction efforts. They assure that this isn’t a permanent change and remain focused on returning 70% of free cash flow to shareholders over time.
This decision will free up about $1.4 billion annually that can instead go toward operational funding and debt reduction. Although such a sharp fall in yield is difficult for income investors, it reflects a prudent approach for those with long-term stakes. Importantly, LYB has communicated that future dividends will remain on the table should market conditions enhance.
Revenue Underwhelms Expectations
LYB’s Q4 2025 financial results, released on January 30, 2026, were quite disappointing and closely followed the dividend cut announcement. The company reported revenues of $7.091 billion, which is a 9% decline from $7.88 billion in Q4 2024. While these figures slightly exceeded expectations of around $6.9 billion, the decrease reflects lower pricing and reduced sales volumes resulting from industry conditions. Operating EBITDA fell to $417 million, impacted by seasonality and heightened raw material expenses.
The earnings per share story was even less favorable. LYB reported an adjusted loss of $0.26 per share in the fourth quarter, contrary to analyst projections for a small profit. This marks a significant shift from earnings of $0.75 in the same quarter the previous year. Management attributed this downturn to typical year-end challenges along with rising raw material costs. CFO Agustín Izquierdo pointed out that the softness in figures was somewhat alleviated by cost-cutting and improvements in working capital. The company successfully released over $1 billion from working capital in Q4, totaling $3.4 billion in cash and about $8.1 billion in total liquidity for 2025. LYB also achieved an operating cash flow of $2.3 billion in 2025, ahead of schedule regarding its capital improvement plan. The target has now been raised, aiming for an extra $500 million in free cash in 2026 and cumulative savings of $1.3 billion by next year.
The guidance moving forward remains cautious. While no specific revenue or profit forecasts were given, LYB expects variations in raw material and energy pricing. They plan to modestly resume polymer production capacity as inventories normalize and adjust operating rates to meet market demands starting in early 2026. Anticipated capital spending is around $1.2 billion in 2026, with $400 million designated for growth initiatives and $800 million for maintenance. The effective tax rate is also expected to be significantly lower, at 10%.
Analyst Perspectives on LYB Stock
Wall Street analysts hold a variety of views regarding LYB. Goldman Sachs maintained a “sell” rating, citing a target price of $51 along with uncertainties surrounding the dividend policy. They noted that investors might be hesitant about the timing of the cut, indicating doubts about the dividend’s sustainability. On a more optimistic note, Mizuho recently raised its target to $53, highlighting LYB’s better-than-expected fourth-quarter sales and effective cost-reduction strategies potentially mitigating the economic downturn. KeyBanc keeps its sector weighting as “unchanged,” remarking on the ongoing weakness in olefins/polyolefins and elevated MTBE costs, yet acknowledges the current dividend yield of 11% as a remarkable return for investors.
The consensus on LYB among analysts leans toward a Hold, with an average price target around $50.47, suggesting mild downside potential from present levels. However, analysts concur that 2025 likely marked a low point, and as cost-cutting progresses, several are slightly adjusting their revenue forecasts upward for 2026.
On the date of publication, Nauman Kahn did not have (directly or indirectly) any positions in the securities mentioned in this article. All information and data in this article are for informational purposes only.
