Entering text into the input field will update the search result below

Celanese: 2.6% Yield Backed By Copious FCF

Mar. 05, 2020 8:10 AM ETCelanese Corporation (CE)
Vasily Zyryanov profile picture
Vasily Zyryanov


  • Economic uncertainty amid the trade war sent Celanese's 2019 sales plunging. Margins, net income, and cash flow were also impacted.
  • Despite headwinds, Celanese delivered over $1 billion in free cash flow left after covering the capital expenditures.
  • Given copious FCF, I reckon Celanese's dividend is relatively safe.
  • On the negative side, the company is surely not immune to the repercussions of COVID-19.

A few high-quality, dividend-paying names were battered amid the recent coronavirus-fueled sell-off. Among them was Celanese Corporation (NYSE:CE), a global chemical and specialty materials company. After a ten-year history of dividend growth, the stock yields approximately 2.6%. In the article, I would like to assess its most recent financials and expound on why this cash flow machine might be among dividend stocks worth considering.

2019 was overshadowed by a revenue decline

Celanese Corporation presented its Q4 and 2019 results on January 30. Though pundits have surely factored persistent weakness in the company’s end-markets in the net profit and sales estimates, the Q4 top and bottom lines still did not live up to Wall Street’s expectations. Both GAAP and adjusted EPS, which is purified from irregular items, were below analysts’ targets.

The company’s segments Engineered Materials, Acetate Tow, and Acetyl Chain were all afflicted and delivered bleak net sales and operating income.

  1. Engineered Materials, Celanese’s flagship division, which produces and sells such materials as polyoxymethylene, thermoplastic polyesters, nylon, etc., experienced an 8% sales drop. Adjusted earnings before interest & tax dived 11%.
  2. Acetate Tow that produces and sells acetate flake and tow mostly for cigarette filters was less afflicted and ended 2019 with a 2% revenue decline. Adjusted EBIT changed only marginally.
  3. Acetyl Chain, the second-largest contributor to the consolidated top line, faced the steepest decline compared to other divisions; its net sales contracted by more than 16%. One of the culprits of the revenue slump was the acetic acid price in China, which dropped by approximately 40% year over year.

The disappointing performance was caused by headwinds that the U.S.-China trade confrontation had spawned. CE’s results are inextricably intertwined with the pace of the global economy, as the corporation addresses a plethora of end-markets from automotive and industrial to medical and

This article was written by

Vasily Zyryanov profile picture
Vasily Zyryanov is an individual investor and writer.He uses various techniques to find both relatively underpriced equities with strong upside potential and relatively overappreciated companies that have inflated valuation for a reason.In his research, he pays much attention to the energy sector (oil & gas supermajors, mid-cap, and small-cap exploration & production companies, the oilfield services firms), while he also covers a plethora of other industries from mining and chemicals to luxury bellwethers.He firmly believes that apart from simple profit and sales analysis, a meticulous investor must assess Free Cash Flow and Return on Capital to gain deeper insights and avoid sophomoric conclusions.While he favors underappreciated and misunderstood equities, he also acknowledges that some growth stocks do deserve their premium valuation, and its an investor's primary goal to delve deeper and uncover if the market's current opinion is correct or not.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.