Last week, FMC Corporation (FMC) released its fourth-quarter earnings, after which the stock lost over a third of its market cap and fell to the lowest level since 2016. While FMC has since recovered slightly, it is deep in the red for the year and is the second worst-performing constituent of the S&P 500 Index ($SPX).
Meanwhile, after the crash, FMC’s dividend yield has risen to 6.6% which is over five times what an average S&P 500 Index constituent pays. On top of that, while several brokerages cut FMC’s target price following its Q4 earnings, the mean target price is still significantly above its current price. In this article, we’ll examine whether FMC stock is a buy for its healthy dividend yield.
FMC Has a High Dividend Yield, But Is It Stable?
It is pertinent to understand that dividend yields are not static; they are a function of dividend payout and the current stock price. While the dividend is quite stable and usually upward trending, the stock price is volatile.
While stocks with high dividend yields might appear attractive, more often than not they are due to the crash in stock price, as has been the case with FMC. In many cases, companies with extremely high dividend yields are troubled and often end up slashing or suspending their dividends. This is especially true if the dividend yield runs well ahead of its historical averages and industry peers. We see most of this now with FMC, as its dividend yield is significantly higher than historical averages. It is therefore important to examine whether the company’s dividend payouts are stable.
FMC has projected 2025 free cash flows of between $200 million and $400 million. At the midpoint, that is close to its annual dividend payout. Put differently, FMC would have just about enough cash to pay dividends this year assuming it hits the midpoint of its guidance. This would however leave little legroom for deleveraging - something the company needs given its massive debt burden.
Notably, Bayer (BAYRY) which is also in the agrichemical industry, slashed its dividend last year to pare its burgeoning debt pile. FMC had a net debt of around $3 billion at the end of 2024 while the net debt to earnings before interest, tax, depreciation, and amortization (EBITDA) was 3.3x.
Overall, while FMC’s dividend looks safe for now, there is a risk of the company slashing payouts if earnings and cash flows don’t improve in 2026 and beyond.
FMC Stock Forecast
After FMC’s Q4 earnings release, several analysts slashed their target prices while at least three brokerages – UBS, RBC, and Bank of America – downgraded the stock. However, despite the big price cuts from brokerages, FMC’s current mean target price of $53.56 is over 52% higher than the Feb. 10 closing price. Of the 18 analysts covering FMC, six rate it as a “Strong Buy” and 11 as a “Hold.” The remaining analyst has a “Moderate Sell” rating on FMC.
FMC Faces Several Headwinds
FMC is going through a painful period that is well captured in its stock price. In June 2024, Pierre Brondeau, who had served as FMC’s CEO between 2010 and 2020, returned as the company’s chief executive. He has been trying to transform the business including through cost cuts and realigning its portfolio to focus on core areas while exiting non-core businesses. FMC incidentally joined the long list of companies like Nike (NKE), Disney (DIS), and Intel (INTC) that brought back their ex-CEOs to transform the company. Relying on past leaders is no guarantee of success, however, as Intel which failed to recover under Pat Gelsinger.
Coming back to FMC, it faces both short-term and long-term challenges. In the short term, the company is facing an inventory overhang and is adjusting its inventory levels in markets, which will impact its shipments. During the Q4 earnings call, it highlighted that its customers have also reduced inventory levels. Moreover, given its global operations, a stronger U.S. dollar has been a headwind for FMC, and the company expects a hit of around $70 million from adverse currency movements this year.
From a more medium- to long-term perspective, FMC is battling intense competition in diamide and also faces headwinds from some patent expirations, including for Rynaxypyr. Patent expirations are a serious concern as they would mean that FMC would need to compete with generics, which are priced much lower than branded products.
Should You Buy FMC Stock?
Brondeau characterized 2025 as a “correction” year and stressed that “growth rates post-2025 are more representative of the future growth of FMC.” The company forecasts its sales to reach $5.2 billion in 2027 and its EBITDA to be $1.2 billion. That said, many sell-side analysts are apprehensive about the company’s ability to deliver on its 2025 forecast, let alone on its long-term projections.
However, the stock’s valuation metrics have also taken a beating amid the recent crash and it trades at a forward price-earnings (P/E) multiple of just over 10x. The valuation might not appear all that attractive based on 2025 numbers where FMC’s revenues and profits are expected to fall year-over-year, but things look interesting in 2026 when its strategic actions could start reflecting in its financial performance. Analysts are modeling a 7.2% rise in FMC’s 2026 revenues while projecting its earnings per share to rise by over 18% YOY that year.
I believe that while FMC faces several challenges and management has a lot on its table as it tries to restructure the business, the stock’s valuation looks attractive enough to bet on this troubled name. However, if things do not go as planned, FMC would to forced to change its strategy which among other things might mean axing its generous dividend. Overall, while FMC might fit into portfolios of investors with a high-risk appetite, it is not a name that risk-averse investors seeking consistent dividends should consider - at least for now.
