Eastman Chemical Company’s (EMN - Analyst Report) Board has hiked its quarterly cash dividend by 17% to 35 cents per share from the prior payout of 30 cents. The increased dividend will be paid on Jan 2, 2014, to stockholders of record as of Dec 16, 2013.
Prior to this, on Dec 6, 2012, Eastman Chemical increased its quarterly cash dividend by 15% to 30 cents per share from the previous payout of 26 cents. The increased dividend was paid on Dec 31, 2012, to stockholders of record as of Dec 17, 2012.
Eastman Chemical has now hiked dividend for three years in a row. This dividend hike testifies the Board’s confidence in the company’s ability to generate continued earnings growth and strong cash flow. Eastman Chemical is committed to maintaining a strong financial position by executing its strategy to deliver consistent and superior value.
The dividend hike was backed by Eastman Chemical’s healthy earnings for the third quarter of 2013. The company’s adjusted earnings (from continuing operations) of $1.68 per share for the reported quarter topped the Zacks Consensus Estimate by 4 cents and exceeded the year-ago adjusted earnings of $1.57. Strong performance in Additives and Functional Products and Advanced Materials divisions drove the better-than-expected earnings.
Eastman Chemical’s profit (from continuing operation) doubled year over year to $308 million or $1.97 a share from $154 million or 99 cents a share a year ago. The bottom line was boosted by higher sales and lower costs.
Revenues rose roughly 3% year over year to $2,338 million, beating the Zacks Consensus Estimate of $2,316 million. Sales were driven by gains across the Additives and Functional Products and Advanced Materials divisions, which more than offset the decline in the Adhesives and Plasticizers division. The company saw higher sales across all geographic regions in the quarter.
The dividend increase is also a testimony to the company’s healthy balance sheet. Eastman Chemical ended the third quarter with $222 million of cash and generated operating cash flows of $427 million during the quarter.
Eastman Chemical’s diversified chemical portfolio and its integrated and diverse downstream businesses remain its strength. The company should continue to benefit from the synergies of its Solutia acquisition. It also stands to gain from business restructuring, cost-cutting measures and increased capacity additions.
However, Eastman Chemical, a Zacks Rank #4 (Sell) stock, remains exposed to raw material cost pressure. Uncertainty regarding the timing of a recovery in Europe also remains an overhang.
Other companies in the chemical space worth considering include Methanex Corp. (MEOH - Analyst Report), Johnson Matthey plc (JMPLY) and Asahi Kasei Corp. (AHKSY). All of them hold a Zacks Rank #1 (Strong Buy).