The EMN Stock article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.

Summary:

• EMN has a YTD price return of more than -24%. I say this stock is a great buy-the-dip gambit. EMN now only trades at 0.89x TTM Price/Sales.
• The COVID-19 pandemic is largely responsible for EMN’s negative performance this year. However, governments will eventually have to ease their restrictions to save the economy.
• Going forward, EMN has solid upside potential. Buying it now while it is very affordable is judicious.
• Eastman Chemical Company has a well-diversified product portfolio. It is also an excellent dividend payer.
• EMN has a bullish one-year algorithmic forecast score from I Know First.

Eastman Chemical Company (EMN) is a former subsidiary of Kodak (KODK). EMN has flourished while KODK is still going on a deep dive. I strongly recommend EMN as a buy right now because of its -24.55% YTD price return. I’m always predatory when a great stock is beaten down to bargain price levels. I like buying high-quality stocks that the S&P 500 outperforms.

The most attractive feature of EMN is not its current low 0.86 TTM Price/Sales and 10.18 TTM Price/Earnings valuation ratios. EMN is a high conviction buy mainly because of its historically-strong dividend payments. The chart below proves Eastman Chemical has a very strong moat and profitable business. For the past twenty years, EMN has paid out dividends. More importantly, EMN touts a 10-year dividend growth rate CAGR of 11.09%. The COVID-19 global pandemic might affect the near-term sales of Eastman Chemical, but it will not kill its dividend payments. EMN is a buy-and-hold forever stock because of its well-protected dividends.

Why Eastman Chemical’s Dividend Payments Are Protected

I am highly confident that EMN can continue its dividend payments for twenty more years to come. EMN is profitable and will always stay that way. A company that is consistently profitable in a very competitive industry is high conviction buy.  Eastman Chemical touts a very comprehensive list of commercial products. It caters to several industries and applications. EMN is extremely well-diversified. It cannot be a hostage to any boom-bust cycle of a particular industry.

The hundreds of products that Eastman Chemical sells are of course protected by its patents. No competitor of EMN can just replicate the company’s plastic, polymer, chemical, or fiber-based products. Eastman Chemical lets other companies/individuals license their patents. Aside from patents, EMN also licenses its equipment designs, trademarks, process optimizations, operating procedures, and plant and process designs.

Selling varied and patented products to diverse industries is why EMN is always profitable. Third-party companies will always try to license anything from EMN if it will boost their own fortunes. This is another strong reason why you should go long on Eastman Chemical. This company has a treasure trove of patents and intellectual property assets that it knows how to monetize. Licensing IP to others is a 100% margin business. IP licensing is easy money that could help EMN maintain its dividend payments for many years to come.

(Source: MacroTrends)

The chart below is likely why Seeking Alpha gave a Very Good rating for EMN’s dividend quantitate evaluation.  The chart also should assure that EMN’s 4.29% dividend yield is safe. This current pandemic is also not going to stop EMN from achieving forward annual dividend payment of $2.64.

Debt-laden But Has Decent Cash Flow

The long history of EMN’s profitability is why it continues to possess a decent balance sheet. Yes, Eastman Chemical has a heavy long-term debt load of $5.4 billion. However, the company’s free cash flow is robust enough to service this debt. The chart below denotes that EMN is a safe long-term investment.

Compared to its Materials sector peers, EMN is also capable of servicing its debt. The TTM net operating cash flow of Eastman Chemical is $1.68 billion and it’s capital expenditures is less than $418 million.

Conclusion

It is not very often that I write about dividend-paying companies. EMN only came into my radar because I was reading an e-book about the rise and fall of Kodak. We are still under community quarantines and my sprained right ankle still hurts. Reading e-books keeps me calm and sometimes it leads me to find great investing opportunities. Eastman Chemical is one of these gems that most investors are no longer aware of.

My high conviction buy rating for EMN is also thanks to its bullish one-year forecast from I Know First. The deep learning algorithm of I Know First prospers because it reminds us about unknown or little known stocks that are worth adding to our investment portfolios.  

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