Dow Inc Stock: Nearly 10%-Yielder at a Massive Discount
July 16, 2025
Could DOW Stock Be the Best Contrarian Play?
If you’re an income investor, you likely know the struggle: finding high-yield stocks that are also sustainable is almost like finding a needle in a haystack. Life becomes even more difficult if you are hunting for value in this uncertain market.
Take a look at Dow Inc (NYSE:DOW). It’s a legacy name in the materials science industry that’s currently trading at a steep discount, and paying a dividend of around 10%.
Generally, this high of a yield usually sends red flags flying, but in this case, Dow Inc stock is down, but it’s not out. The stock isn’t showing up in financial press headlines at the moment, but the business behind it remains solid, and the cash flow is still rolling in.
Yes, this seems bold, but it’s worth saying: Dow Inc stock could be one of the best high-yield contrarian plays on the market right now.
What Does Dow Inc Do?
Headquartered in Midland, Michigan, Dow Inc is one of the largest players in the materials science space. Its products are used everywhere, from packaging and automotive parts to infrastructure and electronics. The company has global footprint with customers across North America, Europe, Asia, and Latin America.
Dow operates through three business segments:
- Packaging & Specialty Plastics: Think food packaging, industrial films, and everyday consumer goods
- Industrial Intermediates & Infrastructure: This includes chemicals used in construction, energy, and automotive industries—like polyurethanes, adhesives, and sealants
- Performance Materials & Coatings: Paints, coatings, and silicones for buildings, cars, and more (Source: “Profile,” Yahoo! Finance, last accessed July 9, 2025.)
Dow Inc Stock Is Down, But Not Out
DOW stock has been featured here few times, with the last time being in early June 2025. Unfortunately, since then, the stock price has been choppy to say the least.
Sure, the price action has been frustrating, but here’s the thing: Dow Inc’s business fundamentals remain intact. And for income-focused investors, the 10% dividend yield alone deserves attention.
I still believe that DOW stock is a compelling opportunity, not only because it offers robust passive income, but also because it’s trading at what I consider to be pennies on the dollar compared to what it should be worth.
Dow Inc Stock Chart Suggesting Accumulation
On the surface, the DOW stock chart looks awful. The stock is currently trading below its 50-week and 200-week moving averages, indicating a downtrend and bearish investor sentiment.
But there’s more than meets the eye here.
Over the past few months, every time Dow Inc stock has dipped into the $25.00–$27.00 range, buyers have stepped in. That’s a sign of accumulation, and it could be a bullish signal suggesting that larger investors are quietly building positions.
It’s also worth noting that the moving average convergence-divergence (MACD) momentum indicator is trending higher, while the stock remains flat. That kind of divergence often hints that a bullish breakout could be brewing.
Chart Courtesy of StockCharts.com
In addition to all this there’s something not shown on the chart: short interest.
As per the most recent data, Dow Inc stock’s short interest is just 5.37% of the float. This is a relatively low figure, which tells me that investors aren’t aggressively betting against the stock. (Source: “Statistics,” Yahoo! Finance, last accessed July 9, 2025.)
Dow Taking All the Right Steps
Dow is making smart moves to improve profitability, too, something that’s definitely now shown in the DOW stock chart.
The company is in the middle of streamlining its European operations, shutting down three upstream facilities to better align with long-term industry demand. This isn’t just cost-cutting for the sake of it—it’s a calculated move to boost earnings.
With this, Dow’s earnings before interest, taxes, depreciation, and amortization (EBITDA) savings are expected to be $200.0 million annually. This should start to show up in 2026, with the full impact being felt by 2029. (Source: “Dow will shut down three upstream European assets in response to structural challenges in the region,” Dow Inc, July 7, 2025.)
To me, this shows that Dow is committed to becoming a leaner, more efficient company.
But don’t forget the big picture here. Even with its business facing some headwinds, Dow is still expected to report some massive revenue and profitability.
Wall Street analysts are expecting the company to report revenue of $42.0 billion in 2025 and of over $43.0 billion in 2026. Earnings per share are expected to more than double from $0.45 in 2025 to $1.19 in 2026. (Source: “Analysis,” Yahoo! Finance, last accessed July 9, 2025.)
And over the past 12 months, Dow has generated $2.54 billion in operating cash flow—solid support for both its operations and dividends.
It can’t be stressed enough: this business isn’t broken; it’s just temporarily out of favor.
Dow Inc Stock’s Valuation Screams “Undervalued”
One of the most compelling reasons to be bullish on DOW stock is valuation.
Dow Inc stock currently trades at a price-to-sales (P/S) ratio of 0.45. At its core, this ratio indicates how investors are valuing each $1.00 of sales. Currently, they are valuing each $1.00 of sales at Dow at just $0.45.
Here’s the kicker: the five-year average P/S for DOW stock is 0.78, and the industry average is around 1.57. (Source: “Key Measures,” CNBC, last accessed July 9, 2025.)
So, Dow Inc stock is trading 42% below its own five-year average and 71% below the industry average. This is what I call “pennies on the dollar.”
Remember that Dow is not some speculative small-cap company; it’s a well-established leader that’s priced like an unknown small-cap name. I think this is a classic case of investor overreaction.
Hard to Ignore a 10% Dividend Yield
Now let’s talk income.
At today’s price, Dow Inc stock yields close to 10%, with an annual dividend of $2.80 per share, or $0.70 per quarter. The company hasn’t skipped a beat in paying it.
With any double-digit yield, it’s fair to ask if the dividend is safe. In Dow’s case, the answer is yes—for now. The company has the cash flow and stability to support it.
The Lowdown on Dow Inc Stock
Dow Inc stock is out of favor for now, but for income investors, it could be presenting a very compelling opportunity.
Dow comes with:
- A massive 10% dividend yield
- A chart that’s showing signs of accumulation
- Deep value compared to peers in the industry
- A long-term plan to improve margins
- A globally diversified business model
This stock checks a lot of boxes for value and income investors.
No wonder—over 1,700 institutional investors continue to hold Dow Inc stock in their portfolio. The Vanguard Group holds over 82 million shares, or close to 12% of all outstanding shares. (Source: “Holders,” Yahoo! Finance, last accessed July 9, 2025.)
