Trinseo Boosts Quarterly Dividend 11% (TSE)
By: Ned Piplovic,
Featured Image Source: Company Website
A 2.3% yield might seem insubstantial compared to higher-yield segments of the market such as Utilities, where the yield on the Utilities Select Sector SPDR ETF (XLU) is currently 3.35%, but Trinseo’s current yield outperforms by double-digit percentages the average yields of its peers. Additionally, the total annual dividend payout has almost doubled since distributions began in 2016.
Trinseo has exceeded analysts’ earnings estimates in the last two quarters and will host a conference call to discuss its second-quarter 2018 financial results on Friday, Aug. 3 at 10 a.m. EST. If the results are positive, investors could find the recent share price decline and flat trading of the last two weeks to be an opportunity to acquire shares at a discounted price. In addition, the closing share price of $70.85 on July 3 is more than 17% below the average price target of $85.78, which means that the stock potentially has another 20% to grow.
Investors who believe the share price will resume its growth and want to take advantage of the upcoming higher dividend payout may want to take a position prior to the company’s ex-dividend date of July 10, 2018. This will ensure eligibility for the next round of dividend distributions on the July 25, 2018 pay date.
Trinseo S.A. (NYSE:TSE)
Headquartered in Berwyn, Pennsylvania and formed in 2010 by combining the technologies and capabilities of four businesses of the Dow Chemical Company — Polycarbonate and Compounds & Blends, Paper and Carpet Latex, Synthetic Rubber and Styrenics — Trinseo S.A. manufactures and markets synthetic rubber, latex binders and plastic products. The company operates through two business divisions: Performance Materials and Basic Plastics & Feedstocks. Trinseo provides various plastic and rubber materials for the carpet markets, as well as performance latex products for the adhesive, building and construction markets. Additionally, Trinseo offers engineered compounds and blend products for the automotive, consumer electronics, medical, electrical and lighting markets. The Basic Plastics segment provides materials for use in appliances, food packaging, food service disposables and consumer electronics. Trinseo currently owns and operates 15 manufacturing sites and 10 research and development facilities globally.
Trinseo’s upcoming dividend payment at the end of July marks just the ninth consecutive distribution since the company began paying dividends in the third quarter of 2016 and its second quarterly increase in that time. The upcoming $0.40 quarterly dividend distribution is more than 10% higher than the prior $0.36 payout and amounts to a $1.60 annualized dividend, or a 2.3% yield at current prices.
This yield is 28% higher than the 1.76% average yield of the overall Consumer Goods sector and 55% above the simple average yield of all the companies in the Rubber & Plastics industry segment. Additionally, it is 12.4% higher than the average yield of the segment’s only dividend-paying companies. Over the past two years, the quarterly payment has grown by a third.
TSE shares experienced a general uptrend over the past five years, though the company’s share price dropped more than 17% in the first six weeks of the trailing 12-month period to reach a 52-week low of $58.45. The stock reversed direction immediately after bottoming out and recovered all its losses over the subsequent 60 days, continuing to ascend over the next three months to a 52-week high of $83.90 on January 25, 2018 — a total gain of 43.5% over the August low. Unfortunately, TSE joined the overall market pullback over the last few months and gave back all its gains over the past year. On July 3, 2018, the share price closed at $70.85, which was just 0.4% higher than one year earlier. However, that closing price was 21.2% above the 52-week high from August 2017 and 250% higher than it was five years earlier.
The flat share price over the last year limited the total return in the past 12 months to just 4.85%. However, aided by a more robust long-term upward trend, the total return over the past three years was more than 180%.
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