Dow Chemical and DuPont Exiting Commodity Businesses
Midland, Michigan-based Dow Chemical Co. (NYSE: DOW – $38.04) will consider selling its epoxy, construction and chlorine businesses as it joins industry rivals in shedding units vulnerable to commodity price swings, according to CEO Andrew Liveris. Dow, the largest U.S. chemical maker by sales, reported a better-than-expected quarterly profit last month due to strong margins in its plastics business and higher sales of pesticides to farmers. Dow has already divested non-core businesses worth about $8 billion in revenue since 2009, and plans this year to close the previously announced sale of its polypropylene licensing and catalyst business and its plastics additives unit. Like competitor DuPont (NYSE: DD – $59.74) the company is pushing hard into the agricultural sector, where sales have boomed on year-round demand for seeds and pesticides for the crops needed to feed an expanding global population. DuPont has announced plans to exit its titanium paint pigments business and other performance chemicals to focus on its agricultural unit, where higher sales helped to boost its quarterly profit. Dow and DuPont are trading at new 52-week highs and pay handsome dividends yielding 3.4% and 3.0%, respectively. Aggressive pick Dow is more vulnerable to global economic swings than more technology driven income choice DuPont, but both possess good total return potential out to late decade and can be held in their respective portfolios for continued price appreciation and dividend growth.