Stock Analysis on Net
Stock Analysis on Net

LyondellBasell Industries N.V. (NYSE:LYB)

This company has been moved to the archive! The financial data has not been updated since August 2, 2019.

Dividend Discount Model (DDM)

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Dividends are the cleanest and most straightforward measure of cash flow because these are clearly cash flows that go directly to the investor.

Intrinsic Stock Value (Valuation Summary)

LyondellBasell Industries N.V., dividends per share (DPS) forecast

US$

Microsoft Excel
Year Value DPSt or Terminal value (TVt) Calculation Present value at 15.86%
0 DPS01 4.00
1 DPS1 5.44 = 4.00 × (1 + 35.88%) 4.69
2 DPS2 7.03 = 5.44 × (1 + 29.43%) 5.24
3 DPS3 8.65 = 7.03 × (1 + 22.97%) 5.56
4 DPS4 10.08 = 8.65 × (1 + 16.52%) 5.59
5 DPS5 11.10 = 10.08 × (1 + 10.07%) 5.32
5 Terminal value (TV5) 211.20 = 11.10 × (1 + 10.07%) ÷ (15.86% – 10.07%) 101.18
Intrinsic value of LyondellBasell Industries N.V. common stock (per share) $127.59
Current share price $76.14

Based on: 10-K (reporting date: 2018-12-31).

1 DPS0 = Sum of the last year dividends per share of LyondellBasell Industries N.V. common stock. See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.68%
Expected rate of return on market portfolio2 E(RM) 13.78%
Systematic risk of LyondellBasell Industries N.V. common stock βLYB 1.23
 
Required rate of return on LyondellBasell Industries N.V. common stock3 rLYB 15.86%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rLYB = RF + βLYB [E(RM) – RF]
= 4.68% + 1.23 [13.78% – 4.68%]
= 15.86%

Dividend Growth Rate (g)

Dividend growth rate (g) implied by PRAT model

LyondellBasell Industries N.V., PRAT model

Microsoft Excel
Average Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Selected Financial Data (US$ in millions)
Dividends, common stock 1,554 1,415 1,395 1,410 1,403
Net income attributable to the Company shareholders 4,688 4,879 3,836 4,476 4,174
Sales and other operating revenues 39,004 34,484 29,183 32,735 45,608
Total assets 28,278 26,206 23,442 22,757 24,283
Total Company share of stockholders’ equity 10,257 8,949 6,048 6,550 8,314
Financial Ratios
Retention rate1 0.67 0.71 0.64 0.68 0.66
Profit margin2 12.02% 14.15% 13.14% 13.67% 9.15%
Asset turnover3 1.38 1.32 1.24 1.44 1.88
Financial leverage4 2.76 2.93 3.88 3.47 2.92
Averages
Retention rate 0.67
Profit margin 12.43%
Asset turnover 1.34
Financial leverage 3.19
 
Dividend growth rate (g)5 35.88%

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

2018 Calculations

1 Retention rate = (Net income attributable to the Company shareholders – Dividends, common stock) ÷ Net income attributable to the Company shareholders
= (4,688 – 1,554) ÷ 4,688
= 0.67

2 Profit margin = 100 × Net income attributable to the Company shareholders ÷ Sales and other operating revenues
= 100 × 4,688 ÷ 39,004
= 12.02%

3 Asset turnover = Sales and other operating revenues ÷ Total assets
= 39,004 ÷ 28,278
= 1.38

4 Financial leverage = Total assets ÷ Total Company share of stockholders’ equity
= 28,278 ÷ 10,257
= 2.76

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.67 × 12.43% × 1.34 × 3.19
= 35.88%

Dividend growth rate (g) implied by Gordon growth model

g = 100 × (P0 × r – D0) ÷ (P0 + D0)
= 100 × ($76.14 × 15.86% – $4.00) ÷ ($76.14 + $4.00)
= 10.07%

where:
P0 = current price of share of LyondellBasell Industries N.V. common stock
D0 = the last year dividends per share of LyondellBasell Industries N.V. common stock
r = required rate of return on LyondellBasell Industries N.V. common stock

Dividend growth rate (g) forecast

LyondellBasell Industries N.V., H-model

Microsoft Excel
Year Value gt
1 g1 35.88%
2 g2 29.43%
3 g3 22.97%
4 g4 16.52%
5 and thereafter g5 10.07%

where:
g1 is implied by PRAT model
g5 is implied by Gordon growth model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 35.88% + (10.07% – 35.88%) × (2 – 1) ÷ (5 – 1)
= 29.43%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 35.88% + (10.07% – 35.88%) × (3 – 1) ÷ (5 – 1)
= 22.97%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 35.88% + (10.07% – 35.88%) × (4 – 1) ÷ (5 – 1)
= 16.52%