Evaluating Dow Stock's Actual Performance

Chemical companies are known for paying big dividends, making them a popular choice with income investors. Over the past year, though, many of them have struggled due to a number of factors, among them higher raw material costs, oversupply, and uneven demand.

Even the oldest and largest chemical companies haven't been spared, including Dow (NYSE: DOW), which was spun off from the merged DowDuPont in 2019. But how has the company actually fared?

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1 year: Chemical freeze

Dow's one-year performance has, unsurprisingly, been dreadful. Because of an industrywide slowdown, its stock slid about 20% between December 2024 and March 2025. But the big drop came in April after management announced it would cut the company's dividend in half, from $0.70 per share to $0.35 per share. In the wake of that announcement, the stock price dropped by another 20%.

However, that wasn't the end of the pain for Dow shareholders. After a poor Q2 earnings report, shares dropped again. As a result, the company's one-year price change as we begin December is negative 46.3%. That's an especially painful result when you consider that the broader market, as measured by the S&P 500, is up 13.1% over that time frame.

Even when you factor in reinvestment of the company's dividend -- which, though reduced, still currently yields 8.8% thanks to the share price drop -- its total return performance only "improves" to negative 42.1%. Meanwhile, the S&P 500's total return including dividend reinvestment over the past year was 14.4%.

Do things look any better for Dow over the longer term?

3 years: Chemical burn

In a word, no, they don't. Although its steep share price slide didn't begin until late 2024, Dow's stock didn't really rise much in the prior two years, so the company's three-year return is negative 53.4%, or negative 44.2% on a total return basis.

That's not much worse than the company's one-year return, but the opportunity costs are much greater. That's because the S&P 500 has risen by 67.4% on an absolute basis, and 74.5% on a total return basis during this same time frame. A three-year investment in Dow has lost to the market by 118.7 percentage points.

5 years: Chemical fire

The five-year return of an investment in Dow isn't much different from the three-year return: negative 55.5% on an absolute basis or negative 41.6% on a total return basis. However, the opportunity cost once again soars because of the broader market's gains during 2021 and 2022. The S&P 500 is up by 86.3% on an absolute basis or 100.3% on a total return basis over the last five years. That means a five-year investment in Dow is trailing the market by about 142 percentage points either way.

Interestingly, Dow's total returns were actually competitive with the broader market's until early 2023, even outperforming the market during certain periods. In 2023, though, Dow's stock plateaued while the market kept rising, setting the stage for its terrible recent performance.

If there is a silver lining, it's that Dow's dividend cut should set the company up for success once the chemical industry comes out of the doldrums. But there's no telling when that will be.

John Bromels has positions in Dow. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.