Is LyondellBasell’s Nearly 10% Dividend Safe, or a Warning Sign for Investors?

Key Points

• LyondellBasell’s nearly 10% dividend yield is attractive, but it’s elevated largely because the stock has fallen and the cycle is weak.
• Dividend coverage improved recently, yet full-year free cash flow lagged the dividend payout, keeping sustainability questions front and center.
• Leverage has risen versus historical norms, and management has signaled the dividend is under review—making policy decisions a near-term catalyst.

When a stock’s dividend yield is approaching or exceeding double-digits, it’s only natural for investors to feel intrigued. With an indicated dividend yield of approximately 9.5%, chemical stock LyondellBasell Industries NYSE: LYB is an interesting name worth evaluating.

While this very high-yielding stock looks enticing, names like this come with key risks to consider. Often, dividend yields become so high simply because a company’s stock price has fallen precipitously. Thus, high yields can indicate that a company’s underlying business is struggling.

This is the case for LyondellBasell, with its stock price down around 40% over the past three years. When operating in a difficult environment, the future of a stock’s dividend faces risk, as a firm’s ability to pay out cash to shareholders comes under pressure.

For example, basic materials and chemical company DOW NYSE: DOW had a dividend yield near 10% from April to mid-July of 2025. The firm then cut its dividend in half. This shows that when evaluating very high-yield stocks, investors can’t simply "set it and forget it."

So, when it comes to LyondellBasell, is the company’s sky-high yield safe and sustainable? Additionally, what does the stock offer in terms of share price upside?

LYB: Chemical Giant Operating in Historically Weak Environment

Lyondell’s business revolves around converting hydrocarbon feedstocks, such as ethane, propane, and butane, into plastic resins and other chemicals. Consumer products, packaging and auto parts are some of the main end use cases for Lyondell’s chemicals. Because Lyondell produces commodities, global supply and demand determine the prices customers pay. Currently, Lyondell’s market is facing oversupply, pressuring prices. In 2025, margins across Lyondell’s relevant businesses were approximately 45% below historical averages.

While this provides significant room for recovery, it also shows that Lyondell’s business is currently facing big-time headwinds. When evaluating the sustainability of the firm’s dividend, assessing when a cyclical recovery in Lyondell’s business could take place is key. The company says it expects to see “modest improvements” next quarter. However, this is simply a seasonal dynamic, not a sign that the market is recovering overall.

Questions Around Dividend Sustainability Persist

In 2025, Lyondell paid out $1.76 billion worth of dividends. That is around 2.4 times higher than the free cash flow it generated. This dynamic did improve significantly in the latest quarter. The company’s free cash flow of $557 million fully covered the $443 million in dividends it paid.

Still, the company’s low cash generation over the full year compared to its high dividend payout raises real concerns. The company has around $3.4 billion in cash and cash equivalents on its balance sheet. It could use these funds to continue paying its dividend if cash flow remains weak.

On the other hand, Lyondell stresses the fact that it wants to maintain an investment grade credit rating. The firm’s net debt to earnings before interest, taxes, depreciation and amortization (EBITDA) ratio now sits at 3.7x. This is very significantly above the firm’s average Net Debt/EBITDA ratio of 2x over the past 10 years.

In essence, this means that the company is generating very weak operating profits compared to its debt levels. This makes it difficult to say that Lyondell should draw down its cash, which would make this ratio look even worse, to continue paying a very high dividend.

When asked about cutting the dividend, CEO Peter Vanacker said it was a “very good question." He added that Lyondell’s Board of Directors will have their next meeting to discuss the firm’s dividend policy in February. This could be a point at which they decide to lower the payment.

LYB: Dividend at Risk as Recovery Timeline Remains Uncertain

Overall, Lyondell faces a real risk of seeing its dividend cut. Still, this is far from guaranteed. In terms of appreciation upside, analysts aren’t showing much optimism. The MarketBeat consensus price target of $51 implies almost 12% downside in shares. The average of targets updated after the company’s Jan. 30 earnings release is even more bearish, coming in at $47.80.

Still, it is important to note that these are 12-month price targets. A true recovery in Lyondell’s business may not happen over that time. However, should a recovery take place long-term, Lyondell could see significant gains. The stock traded above $85 in 2022 when demand was strong and EBITDA was near highs.