Image Source: Unsplash

LyondellBasell (LYB) is becoming quite the dividend growth stock, and it is making headways into dividend investors’ portfolios. In fact, they just recently announced a solid dividend increase of 5.3%. And the good news didn’t end there. LyondellBasell also announced a $5.20 special dividend to each shareholder.

Therefore, it’s time to dive into LYB to see if they are becoming quite the dividend growth stock as we are mid-way through 2022.

LyondellBasell Stock

LYB is based in the UK, but they do have their US headquarters in none other than Houston, Texas. LYB is one of the largest manufacturers of chemicals in the world. They compete against Dow Chemical (DOW) and Ecolab (ECL), to name a few.

LYB is firing on all cylinders in 2022. In fact, their first quarter earnings were off the charts, literally. LYB had over 44% of revenue growth vs. Q1 last year, and it grew from the recent Q4 2021 period last year. Net income also was $1.3 billion vs. $1.07 billion in the linked quarter, up over 20%. As oil and other prices have been higher, the stock has been sent soaring this year – up over 25%.

Management also updated their outlook to continue to see margin improvement, which should lead to greater net income. There is no wonder why the stock has been performing well, especially when the S&P 500 has been down over 13% through May 27.

Then, LYB announced some impressive news on May 27. LYB increased their dividend from $1.13 to $1.19, or 5.3%. Lastly, to add a little icing or cherry on top, LYB announced a $5.20 special dividend to each shareholder. Talk about dividend growth.

Let’s look at the dividend payout chart for the stock. LYB has paid out special dividends, which makes the chart slightly harder to read. Overall, the dividend has been trending higher for the past 10 years, approximately. It appears to be nice to hold LYB stock.

I believe it’s time to look at LYB stock through the 'Dividend Diplomats Stock Screener,' right?

LyondellBasell Dividend Stock Analysis

I cannot wait to put LyondellBasell stock through the screener. Here, we focus on three main dividend stock metrics:

1. Price to Earnings Ratio (P/E): We look for the price to earnings ratio to be less than the S&P 500 and the competition.
2. Dividend Payout Ratio: The preferred dividend payout ratio is less than 60%. In fact, we believe the perfect payout ratio is between 40% and 60%.
3. Dividend Growth Rate: Given we are dividend investing on our way to financial freedom, as we believe dividend income is the best source of passive income, we look at the five-year dividend growth rate. In addition, we review how many years the company has increased their dividend.

So, let's see how the company did.

1. P/E Ratio: Analysts are expecting $16.65 in earnings for this large chemical company. Based on LYB stock price of $117.08, the P/E ratio is low at only 7.03. The S&P 500 p/e ratio is currently 21x earnings.
2. Dividend Payout Ratio: They didn’t land in the “perfect” payout ratio, but they are actually better – as it’s lower than the 40%, versus being higher. LYB has an extremely safe dividend payout ratio of 28.59%. Think of it like this – LYB retains 70% of their earnings to develop, invest, and research new products, and it pays out almost 30% of their earnings to shareholders. If earnings were cut in half, the dividend would still be safe.
3. Dividend Growth Rate: LYB is consistent. Though they just announced a massive dividend, the dividend growth rate has trended just under 6% over the last five years on average. This is solid overall.

Lastly, we’ll take a look at the dividend yield. As an investor, you want to know how much owning this dividend stock pays you now. The yield for LYB is 4.07%. That is higher than the S&P 500 by approximately 250 basis points. That's not too shabby. This is also higher than most CDs and high yield savings accounts.

Is LYB Stock a Stock to Buy Now?

Now that we’ve gone through the metrics, is LYB a stock to buy for the dividend stock portfolio?

At this time, I am going to keep watching LYB. If they dip below $110 – I will be adding to my already over 100-share position. I believe they’ve been an extremely well-run company, with consistent growth in their dividend and persistence through the tough times recently.