Cheap and Yielding More than 8%, This Dividend Stock Is a Buy

LyondellBasell is one of our top picks to invest in a medium-term rebound in chemical demand—and it’s an attractive dividend stock for income investors as well. One of the world’s largest producers of polypropylene, polyethylene, and propylene oxide, the company has most of its production in North America and benefits from low-cost natural gas. As a result of its cost advantage, LyondellBasell should be able to generate positive free cash flow even during a downturn. This narrow-moat company offers a dividend yield exceeding 8%, supported by a solid balance sheet. And this dividend stock is cheap, trading 38% below our fair value estimate. LyondellBasell lands on our list of The Best Basic Materials Stocks to Buy. It’s also one of Morningstar Chief US Market Strategist Dave Sekera’s 5 Stocks to Buy Before Wall Street Catches On.

LyondellBasell’s products are the building blocks for downstream chemicals and plastics used in industrial and consumer markets alike. Propylene oxide is a chemical derivative used in a range of products, including insulation and furniture cushioning. LyondellBasell employs a propylene oxide production process that yields a co-product of tertiary butyl alcohol, which is used as an input for high-octane gasoline. The company’s commodity chemicals are generally priced off the marginal cost of production. Low natural gas prices and high oil prices have led to substantial profits for companies operating in North America, and we expect this dynamic will persist. Although LyondellBasell may not enjoy the same low-cost raw feedstocks in many of its international operations, it builds its plants to allow different feedstocks to reduce input costs.

Key Morningstar Metrics for LyondellBasell

• Fair Value Estimate: $100
• Star Rating: 4 Stars
• Economic Moat Rating: Narrow
• Uncertainty Rating: High

Economic Moat Rating

We award LyondellBasell a narrow moat rating based on a cost advantage, mostly driven by its olefins and polyolefins segment in North America. The O&P segment represents over half of the overall business, with operations in North America as well as Europe, Asia, and international markets. In this segment, LyondellBasell manufactures ethylene and propylene, key building blocks for countless chemicals and plastics with broad sweeping applications, including automotive components, insulation products, and antifreeze. The majority of the ethylene and propylene that LyondellBasell produces is consumed internally as inputs for its other business lines, expanding the reach of its North American cost advantage throughout the rest of the company. Over 70% of its ethylene and polyethylene production capacity is in North America.

Read more about LyondellBasell’s moat rating.

Fair Value Estimate for LyondellBasell Stock

Our fair value estimate is $100 per share. We forecast a profit decline in 2025, marking the third straight year of falling profits. Our forecast assumes an economic slowdown in 2025 as a result of tariff-related inflation and trade disruption. We forecast annual top-line growth will average in the low single digits from 2025 through 2029, excluding the impact of the refining business, which closed in early 2025. We forecast EBITDA margin, excluding refining, will fall to the high single digits in 2025, but then expand back to the midteens in our midcycle forecast, above the 11% generated in 2024.

Read more about LyondellBasell’s fair value estimate.

Risk and Uncertainty

Oil and gas prices are key determinants of the company’s overall cost basis. Given the inherent volatility in these markets, LyondellBasell’s input costs and the price it receives for its commodity chemicals can vary widely over time. Tariffs and their resulting economic impact could hurt LyondellBasell via reduced US chemical exports and lower volume as tariff-related inflation could weigh on consumer goods purchasing. The company manufactures multiple chemicals, many of which are known to pose hazards to human health and the environment. A finding of liability in an incident could involve hefty fines and lawsuits. LyondellBasell also has the risk of a ban on certain products or chemicals.

Read more about LyondellBasell’s risk and uncertainty.

LyondellBasell Bulls Say

• LyondellBasell benefits from its cost-advantaged North American operations, which use low-cost natural gas-based feedstock.
• By licensing its chemical and polyolefin process technologies, the company can secure asset-light revenue streams that often lead to long-term supply agreements.
• LyondellBasell maintains exposure to a wide variety of industrial and consumer end markets, somewhat mitigating the risk of an industry-specific downturn.

LyondellBasell Bears Say

• Half of LyondellBasell’s operations are outside North America and are subject to higher and more volatile costs, which will weigh on profits.
• The company’s North American natural gas feedstock-based cost advantage will erode over time due to a permanent increase in North American natural gas prices. This will lead to margin compression over the long run.
• Tightening regulations concerning potentially hazardous chemicals could require investment in developing alternative products, which may raise LyondellBasell’s operational costs.

This article was compiled by Susan Dziubinski and Sylvia Hauser. Data as of July 16, 2025.