Valhi, Inc.: A Steady Dividend Anchor in a Volatile Market

In an era of economic uncertainty, reliable dividends have become a rare commodity. Valhi, Inc. (NYSE: VHI), however, continues to defy market volatility with its unwavering commitment to shareholder returns. Recent dividend declarations and shareholder meeting outcomes highlight a company navigating sector headwinds while maintaining financial discipline and leadership stability. For income-focused investors, this presents a compelling opportunity—provided you understand the risks and rewards at play.

The Dividend: Consistency Amid Challenges

Valhi's most recent dividend declaration of $0.08 per share, payable on June 26, 2025, marks the sixth consecutive year of unbroken dividend consistency. This stability is notable given the company's operations in sectors like titanium dioxide (TiO₂) chemicals, where pricing pressures have plagued profitability. Since 2020, Valhi has prioritized dividend payouts over growth, averaging a 0.9% yield based on its current stock price of $33.70.

Yet, the dividend's stagnation—unchanged since 2020—raises questions about growth potential. Analysts have flagged low net profit margins and high liabilities, which could strain Valhi's ability to sustain payouts if revenue falters. A “Sell” sentiment with a $20 price target suggests skepticism about its valuation. However, the dividend's reliability remains a key selling point for income investors.

Leadership Stability: A Pillar of Resilience

At Valhi's May 22 shareholder meeting, seven directors were re-elected, including five holdovers from 2020. Notably, Gina A. Norris and Michael S. Simmons joined the board, replacing Robert D. Graham—a move signaling fresh perspectives without destabilizing continuity. Long-serving directors like Thomas E. Barry (since 2020) and Mary A. Tidlund underscore institutional memory, critical for navigating complex sectors like TiO₂ and real estate.

Insider activity also hints at confidence: Bryan A. Hanley, Senior Vice President, purchased 250 shares in late 2024—a small but symbolic gesture of faith. Meanwhile, institutional investors are mixed, with some like SEGALL Bryant & Hamill, LLC adding shares, while others like the Wisconsin Investment Board reduced stakes. This divergence reflects Valhi's bifurcated narrative: reliable dividends vs. sector-specific risks.

Sector Dynamics: Opportunities and Threats

Valhi's three core sectors—TiO₂ chemicals, component products, and real estate—face divergent trajectories:

1. TiO₂ Chemicals (40% of revenue):
   Global TiO₂ prices have trended downward since 2022, driven by oversupply and weak construction demand. In Q2 2025, prices are projected to remain depressed, with North America hovering near $2,500/MT due to sluggish housing starts. Valhi's margins here are under pressure, but its 18% production volume increase in Q1 2025 suggests operational efficiency gains.

2. Component Products:
   Security and marine components benefit from geopolitical tensions and tech innovation. Valhi's niche in luxury marine parts aligns with rising demand for high-end recreational boating. However, its exposure to supply chain disruptions (e.g., Red Sea piracy impacting shipping) poses risks.

3. Real Estate (Baja Sur, Mexico):
   Valhi's real estate division is thriving in Mexico's La Paz luxury market, where median home prices rose 15% YoY despite transaction slowdowns. This segment's growth, driven by U.S. expats seeking cost-effective coastal living, offers a potential counterweight to chemical sector headwinds.

Why Invest Now?

Valhi's $436 million market cap and $20 price target suggest undervaluation, especially if real estate and TiO₂ divisions stabilize. The dividend's consistency acts as a “floor” for investors, while leadership continuity reduces governance risks. For those willing to bet on a sector rebound, Valhi's low P/E ratio (12x earnings) and debt management (despite high liabilities) make it a contrarian pick.

Risks to Consider

• TiO₂ Pricing: Prolonged weakness could force dividend cuts.
• Real Estate Volatility: Political uncertainty in Mexico and U.S. could delay luxury purchases.
• Low Growth: No dividend hikes since 2020 signal limited upside for growth investors.

Final Call: A Defensive Play for Dividend Seekers

Valhi isn't a high-growth stock, but its rock-solid dividend history and diversified operations make it a defensive asset in turbulent markets. Investors should act now while the stock trades near its 52-week low, balancing risk with the safety of consistent payouts.

Action Item:
For income-focused portfolios, allocate a modest position in VHI. Pair it with sector hedges (e.g., commodity ETFs) to mitigate TiO₂ risks. The dividend's safety—and Valhi's resilience through past cycles—suggests this is a holding to weather volatility and capitalize on undervaluation.

Risk Disclosure: Past performance does not guarantee future results. Sector-specific risks and macroeconomic factors may impact Valhi's operations.