What's not to like about Eastman Chemical (
)? It's up more than 50% this year, it's near a fresh buy point,
and it offers an annual dividend yield of 1.7%.
The former supplier of chemicals to now-defunct camera maker
Eastman Kodak has branched out in recent years. It has acquired
companies that make a broad range of higher-margin specialty
chemicals such as films for touch-screens, an additive that
reduces tire wear, and materials that prevent auto glass from
The company has also expanded geographically in part through
its acquisitions this year of Brazilian company Scandiflex, a
maker of plasticizers, and of St. Louis-based Solutia, a
specialty chemicals company that has operations in the
It also formed a joint venture in China this year to make
acetate tow, used to make cigarette filters, ink reservoirs for
pens, medical devices, and oil and fuel filters. Eastman gets
about half its revenue from the U.S. and Canada and most of the
rest from Asia, Europe, the Middle East and Africa.
Eastman has a best-possible 99 Composite Rating, tops in the
14-member Chemicals-Plastics industry group, which was ranked No.
4 out of 197 as of Thursday's IBD. Fund ownership has increased
for four straight quarters.
The stock topped a 61.58 flat-base buy point Dec. 3, but then
pulled back. It's now just below the buy point and 2% off its
Meanwhile, Eastman pays a quarterly dividend of 26 cents a
share, good for an annualized yield of 1.7%. The company raised
the dividend in 2010 and 2011, and hasn't decreased the payout
since it began offering dividends in 1994.
Acquisitions, an improved global economy and lower raw
material costs have helped Eastman recover from four straight
years of slowing profit growth through 2009.
Profit this year is expected to rise 13% followed by a 17%
gain in 2013. Yet Zacks Investment Research last month downgraded
the stock to neutral on expectations that propane costs will rise
at the end of this year, hurting profit margins. It also cited
Europe's economic woes and downward pressure on prices across
most of the company's product lines.