Chemical Giants Dow and LyondellBasell: High-Yield Turnaround Bets for 2026
The commodity chemicals sector, a bellwether for the global industrial economy, appears to be tentatively turning a corner after a brutal five-year downturn. Two industry titans, Dow Inc. (NYSE: DOW) and LyondellBasell Industries (NYSE: LYB), which saw their shares plunge in lockstep by over 41% in 2025, are leading the early 2026 rally in the materials sector.
Year-to-date, both stocks have climbed more than 15%, buoyed by a broader rotation into cyclical shares. More compelling for income-focused investors are the hefty dividends: Dow yields 5%, while LyondellBasell offers a staggering 10.9% yield. But these payouts come with significant caveats, as both companies navigate a complex path to recovery.
The core challenge remains a global supply glut, driven by overcapacity and intense competition, particularly from Asia, which has suppressed prices and margins for essential chemicals like polyethylene and polypropylene. End markets such as automotive and construction have yet to see a sustained rebound.
In response, both firms have embarked on aggressive restructuring. Dow, on its Q4 2025 earnings call, outlined a final $500 million in cost savings for 2026, part of a $1 billion program, and announced a global workforce reduction of 4,500 roles. The company has also fortified its balance sheet through asset sales and, notably, halved its dividend in July 2025. LyondellBasell is pursuing a similar playbook of plant closures and project delays, targeting over $1 billion in cash improvements, but has so far maintained its dividend—a key reason for its elevated yield.
Analysts remain cautious. Consensus estimates suggest Dow may not return to profitability until 2027, while LyondellBasell is expected to build on a marginally positive 2025. The critical question for investors is whether the dividends are sustainable. Both companies are currently funding payouts through balance sheet maneuvers rather than free cash flow, a situation that may be untenable long-term. Some market observers speculate LyondellBasell could follow Dow in cutting its dividend to preserve cash.
"This is a classic deep-value, high-stakes turnaround play," says Michael Rourke, a portfolio manager at Horizon Capital. "The yields are undeniably attractive, and any meaningful demand recovery will make these stocks look incredibly cheap. But you're being paid to take on substantial operational and balance sheet risk."
Other voices are more skeptical. Lisa Chen, an independent market analyst, offers a sharper critique: "It's a value trap dressed up as an income opportunity. These dividends are on life support, funded by asset sales and debt. Investors chasing that 11% yield are ignoring the very real possibility of a cut that could crater the share price further. There are safer places for income."
Contrasting views come from long-term sector watchers. David Park, a retired chemical engineer and retail investor, sees potential: "The world still runs on plastics and basic chemicals. These companies are slimming down to survive the trough. If you believe in the long-term cycle, buying when there's blood in the streets—and a 5-10% yield while you wait—isn't irrational."
For risk-averse investors seeking reliable income, stable consumer staples giants like Procter & Gamble may remain a preferred alternative. However, for those willing to bet on a cyclical upturn, Dow and LyondellBasell represent leveraged plays on a global industrial recovery, offering high current income alongside the potential for significant capital appreciation—if their turnaround plans succeed.
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*Stock Advisor returns as of February 2, 2026. Disclosure: The Motley Fool has no position in any of the stocks mentioned.