The 10% Dividend Club: Why Dow and LyondellBasell Are Risky, Rewarding Plays Now

The market’s been a rollercoaster lately, but two industrial giants—Dow Inc. (DOW) and LyondellBasell (LYB)—are offering something investors crave: dividend yields nearing 10%. These aren’t typos. As of April 2025, both stocks are delivering payouts that could rival some of the highest-yielding REITs or utilities. But here’s the catch: These are cyclical化工 giants, and their sky-high yields are a double-edged sword. Let’s dig in.

The Numbers Don’t Lie—But the Risks Are Clear

Let’s start with the math. As of April 2025, Dow’s dividend yield is 9.72%, while LyondellBasell’s is 9.33%. That’s eye-popping for stocks in an industry known for volatility. But why so high? Simple: Their stock prices have tanked amid a slowdown in global demand for plastics, chemicals, and industrial materials.

• Dow’s yield is 67% higher than its 10-year average of 5.8%.
• Lyondell’s yield is 74% above its 10-year average of 5.37%.

This isn’t a typo—it’s a screaming buy signal for income seekers… if you can stomach the risks.

Dow Inc. (DOW): The High-Yield Gamble

Dow’s dividend is $0.70 per share quarterly, or $2.80 annually, a payout it’s maintained for 24 straight quarters. But here’s the rub: The company’s payout ratio—the percentage of earnings paid as dividends—is a staggering 170.75%. That means Dow is paying out more in dividends than it earns, relying on debt or cash reserves to cover the gap.

Yet management insists the dividend is “non-negotiable.” Why? Because 65% of shareholders rely on it, and cutting it would trigger a sell-off. For now, near-term debt maturities are manageable ($500 million in 2025, none until 2027), buying time. But the company’s margins are squeezed: Overcapacity in polyethylene and weak demand from China and Europe have slashed operating income.

The Bottom Line on DOW:
- Pros: A 9.72% yield with a rock-solid dividend history (so far).
- Cons: Payout ratio over 170% is unsustainable long-term. A prolonged downturn could force cuts.

LyondellBasell (LYB): The Steadier High-Yield Play?

Lyondell’s dividend is $1.34 per share quarterly, or $5.36 annually, yielding 9.33%. Its payout ratio is healthier: 55.36%, meaning earnings cover dividends comfortably. The company has raised its dividend for 12 straight years, and analysts expect a 5.25% hike in 2025.

But Lyondell isn’t immune to the same headwinds. Overcapacity in polyolefins and weak demand for durable goods are squeezing margins. Competitors in Asia and the Middle East—where shale gas keeps costs low—are undercutting prices. Still, Lyondell’s balance sheet is stronger: It’s reducing buybacks to prioritize dividends, signaling a commitment to income over growth.

The Bottom Line on LYB:
- Pros: A sustainable payout ratio and a 12-year dividend growth streak.
- Cons: Commodity price swings and overcapacity risks could pressure profits.

The Cyclicality Catch-22

Both stocks are cyclical, meaning their fortunes hinge on global economic health. If China and Europe rebound—and demand for plastics, packaging, and construction materials surges—these stocks could soar. But if the downturn lingers, their shares could crater further.

Analysts see this as a “coiled spring” opportunity: Buy now, hold for 3–5 years, and wait for the cycle to turn. The Motley Fool notes that even if dividends were halved, the yield would still be ~5%, which is still compelling.

Action Plan: How to Play This

1. Start Small: Allocate 1–2% of your portfolio to each stock.
2. Average Down: Use dips to add shares—especially on ex-dividend dates (DOW’s next is May 30, 2025; LYB’s next is July 2025).
3. Set a Stop-Loss: Protect gains if yields drop below 8%—a sign of dividend cuts.

Conclusion: High Risk, High Reward—But Only for the Brave

At 9.72% and 9.33% yields, Dow and LyondellBasell are among the highest-paying stocks in the S&P 500. But these aren’t “set it and forget it” buys.

- When yields spike this high, it’s often a sign of panic selling. But if you’re a long-term income investor, these could be diamonds in the rough.
- The key metric: Both companies’ payout ratios. Dow’s 170% is a warning, but Lyondell’s 55% gives more breathing room.

Final Take:
If you’re willing to ride out a potential recession and bet on a cyclical rebound, these stocks could deliver outsized returns. But tread carefully—these yields are a gift wrapped in red ink.

Invest wisely, and don’t let the fear of missing out override common sense.