Navigating Dow's Stock Plunge and Dividend Cut: What's Next?

Dow's stock price plummeted 17% on July 24 after the company announced a 50% cut in its dividend. Despite this, the author is considering buying the stock due to its decline. The author believes that the stock has potential for growth and suggests monitoring the company's financial performance before making a decision.

On July 24, shares of Dow Inc. (NYSE: DOW) plummeted by approximately 17% after the company announced a 50% cut in its dividend. The dividend was reduced from $0.70 per share to $0.35 per share, reflecting the company's challenging macroeconomic environment and industry downturn [1].

The stock's decline brought its price to around $24.37 per share, nearing its 52-week low. This significant drop comes amid broader industry challenges, including oversupply issues, weak margins, and the impact of tariffs. Dow's earnings for the second quarter of 2025 showed a 7% decline in net sales to $10.1 billion, resulting in a GAAP net loss of $801 million, or $1.18 per share [1].

Despite the bleak outlook, some investors are considering buying Dow's stock due to its substantial decline. The stock now offers a high dividend yield of around 6%, which could become more attractive if the Federal Reserve cuts rates later this year. Additionally, Dow's management has been taking aggressive actions to improve future results, including job cuts, expense reductions, and plant closures in Europe [1].

However, analysts have expressed concern about Dow's outlook. Evercore ISI downgraded Dow from Outperform to In Line, slashing its price target from $56.00 to $32.00 amid concerns about the company's financial flexibility and recovery prospects [2]. The stock's high P/E ratio of 61.34x and weak gross profit margins of 9.56% further highlight the challenges the company faces.

Investors should closely monitor Dow's financial performance and the broader economic environment before making any investment decisions. The company's debt load and recent losses make it a high-risk proposition, and a potential recession could exacerbate these issues. While the stock has declined significantly, it is too early to determine if it has reached its bottom. Investors should consider taking a small position if the stock stabilizes or waiting until year-end for potential tax-loss selling opportunities.

References:

[1] https://seekingalpha.com/article/4804668-dow-what-to-do-after-stock-plunges-dividend-cut-50-percent

[2] https://www.investing.com/news/analyst-ratings/evercore-isi-downgrades-dow-stock-to-in-line-amid-dividend-cut-concerns-93CH-4152653