LyondellBasell: Navigating Economic Cycles with Resilience

Leading chemical company LyondellBasell Industries (NYSE:LYB) has shown a pattern of strong performance during economic expansions but struggles during downturns, according to Jim Cramer. As the global economy continues to face uncertainty, investors may wonder how LYB's performance aligns with its peers and the broader market. In this article, we will analyze LyondellBasell's performance during different economic cycles and discuss the specific business segments that contribute to its performance.

LyondellBasell's Performance During Economic Expansions and Contractions

During economic expansions, LyondellBasell's revenue and earnings growth have generally kept pace with the broader market. In 2021, for instance, LYB's revenue growth was 5.07%, while the S&P 500 index had a revenue growth of 18.33%. However, during economic contractions, such as the COVID-19 pandemic in 2020, LyondellBasell's performance has been more volatile. The company's revenue growth was -0.44% in 2020, compared to the S&P 500 index's revenue growth of 1.24%.

Specific Business Segments and Economic Cycles

LyondellBasell's performance during strong economic periods is driven by its Olefins and Polyolefins segments, which produce and market olefins, polyethylene, and polypropylene. These products are widely used in various industries, such as automotive, construction, and packaging, and demand for them tends to increase during economic expansions. However, during economic downturns, demand for these products may decrease, leading to a decline in revenue and profitability for these segments.

On the other hand, the Intermediates and Derivatives segment, which produces and markets intermediate chemicals such as styrene monomer, acetyls, ethylene oxide, and ethylene glycol, may also face challenges during economic downturns. These chemicals are used in various industries, and a decrease in demand from these industries can negatively impact the segment's performance.

Furthermore, the company's Refining segment, which refines heavy, high-sulfur crude oil and other crude oils, as well as refined products such as gasoline and distillates, may also struggle during economic downturns. A decrease in demand for refined products or an increase in crude oil prices can negatively impact the segment's performance.

LyondellBasell's Dividend Payout and Growth Pattern

LyondellBasell's dividend payout and growth pattern have shown resilience and consistency across different economic cycles. The company has maintained a strong dividend payout, with a current annual dividend of $5.36, which amounts to a dividend yield of 7.23%. This high yield indicates that the company is committed to returning capital to shareholders through dividends, even during economic downturns.

The company's dividend growth rate has also been consistent, with a year-over-year growth rate of 6.68%. This steady growth demonstrates LyondellBasell's ability to generate cash flow and distribute it to shareholders, regardless of the economic conditions. The company's dividend payout ratio is 81.61%, which is relatively high compared to other companies in the sector. However, this high payout ratio is a testament to LyondellBasell's strong cash flow generation and commitment to returning capital to shareholders.

Conclusion

LyondellBasell's performance during strong economic periods is driven by its Olefins and Polyolefins segments, while its Intermediates and Derivatives and Refining segments may struggle during economic downturns. The company's dividend payout and growth pattern have shown resilience and consistency across different economic cycles, with a high dividend yield and consistent dividend growth. As the global economy continues to face uncertainty, investors should monitor LyondellBasell's performance and consider its resilience during different economic cycles when making investment decisions.