Published Mon, 29 Jun 2020 03:22:41 -0400 on Seeking Alpha
Seeking AlphaDividend Ideas | Basic MaterialsOlin: Consider Chlor-Alkali Heavyweight With ~7.4% YieldJun. 29, 2020 3:22 AM ET|| About: Olin Corporation (OLN)by: Vasily ZyryanovVasily Zyryanov Long/short equitySummaryOLN is a leading chlor-alkali producer in the world.
It has been paying a dividend for 374 consecutive quarters.
OLN has been FCF-positive since at least 2010.
On a negative side, the company has burdensome debt on the balance sheet.
Though 2020 revenue is anticipated to contract in high-single-digit, I anticipate the dividend coverage to remain relatively adequate.
The stock price of Olin Corporation (OLN), a chemical industry heavyweight, has lost around 37% since the beginning of the year, as the market's skepticism towards some cyclical companies most exposed to the repercussions of the economic crisis first resulted in the March sell-off and then hindered the price from the full recovery; the market priced in sapping demand for chlorine and caustic soda amid the crisis in the overall economy precipitated by the coronavirus pandemic.
Meanwhile, OLN's peer, another heavyweight player in the chlor-alkali industry, Westlake Chemical Corporation (WLK) has lost almost a quarter of the market value of equity.
Data by YCharts
While the overall stock market has been rushing to a new zenith, elated at the Fed's monetary stimuli and the V-shape recovery hopes, the depressing stock performance of OLN and WLK looks especially disappointing. However, the silver lining is that capital gains and dividend yields are always antithetical. While OLN share price had been creeping lower, its dividend yield surged to a decade high and is now teetering above 7%. Olin has been paying the dividend for 374 consecutive quarters and did not scale DPS down during the Great Recession of the late 2000s (see the 2010 consolidated cash flow statement for details, page 60).
The company has been paying $0.2 per share since at least 2007, and will likely hold the... Read more