NEW YORK (TheStreet) -- Shares of Dow Chemical (DOW) are up 1.58% to $50.30 in pre-market trade after the chemical maker increased its dividend and said it would buy back shares worth $5 billion, more than doubling its share repurchase program, Reuters reports
Dow and rival Dupont (DD) are facing investor pressure to raise shareholder returns by divesting businesses that are exposed to swings in prices of commodities, Reuters noted.
Dow, which is being pushed by hedge fund manager Daniel Loeb to split up, said it would complete its previous $4.5 billion share repurchase program by the end of the year.
The latest buyback plan brings Dow's total share repurchase program to $9.5 billion.
The company also increased its quarterly dividend to 42 cents per share from 37 cents.
Dow, which has been paying cash dividends every quarter since 1912, said the dividend would be payable on Jan. 30 to shareholders on record as of Dec. 31.
Dow has narrowed its focus to packaging, electronics and agriculture and is looking to raise as much as $6 billion from asset sales, Reuters said.
The company also plans to cut fixed costs by $1 billion over the next three years.
TheStreet Ratings team rates DOW CHEMICAL as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate DOW CHEMICAL (DOW) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and reasonable valuation levels. We feel these strengths outweigh the fact that the company shows low profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Chemicals industry average. The net income increased by 38.0% when compared to the same quarter one year prior, rising from $679.00 million to $937.00 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 9.9%. Since the same quarter one year prior, revenues slightly increased by 4.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The debt-to-equity ratio is somewhat low, currently at 0.77, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.29, which illustrates the ability to avoid short-term cash problems.
- Powered by its strong earnings growth of 44.89% and other important driving factors, this stock has surged by 26.87% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, DOW should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- You can view the full analysis from the report here: DOW Ratings Report