BASF Weathers the Chemical Sector Storm as Buyback and Dividend Story Unfolds

The mood in Germany’s chemical industry has rarely been this bleak. The ifo Institute’s business climate index for the sector plunged to minus 29 points in April, its lowest reading in nearly three years, as the Iran conflict disrupts global supply chains and saps corporate confidence. Yet against this grim backdrop, BASF — the country’s largest chemical maker — has delivered a set of first-quarter numbers that caught the market off guard.

A Profit Surprise in a Sea of Gloom

Revenue for the opening quarter slipped to around €16 billion, weighed down by currency effects from the US dollar and Chinese renminbi. Adjusted operating profit edged lower to roughly €2.4 billion, but that still comfortably beat analyst expectations. The ifo Institute’s Anna Wolf warns that the recent uptick in prices and orders reflects a temporary shift as customers turn to domestic suppliers, not the start of a sustainable recovery. Industry executives share that scepticism, planning to scale back production in the months ahead and hitting the brakes on hiring.

Despite the headwinds, BASF’s management is sticking to its full-year guidance. The target for operating profit remains in a range of €6.2 billion to €7.0 billion, though geopolitical risks could still upend those assumptions.

The Dividend Effect and a Technical Reset

On Thursday, BASF shares fell roughly 3.4% to €50.70, a decline largely explained by the ex-dividend date. The €2.25 per share payout triggered the usual round of profit-taking, with trading volumes surging above two million shares — a sign that institutional investors are repositioning. On a weekly basis, the stock has lost nearly 8%, though it remains up around 13% since the start of the year. The gap to its 52-week high from April is a modest 8%.

Should investors sell immediately? Or is it worth buying BASF?

A €1 billion share buyback programme, now roughly €880 million deep, has been providing underlying support. That programme is scheduled to run until June, meaning the next major test for the stock will come with the second-quarter results, when investors will want to see whether volume growth can continue to offset the drag from elevated energy costs.

How BASF Stacks Up Against Bayer

The comparison with Bayer, another DAX heavyweight, highlights just how different the two investment cases have become. On a 12-month view, BASF has gained roughly 25%, while Bayer has lost nearly 28%. The divergence has only widened in the past three months: BASF is up 9%, Bayer down almost 16%. On Thursday, Bayer fell 2.6% to €37.50, with the market jittery ahead of its first-quarter results on 12 May.

The valuation gap is equally stark. BASF trades at a price-to-earnings ratio of 19.4 for 2026, compared with Bayer’s 8.8. But that apparent bargain at Bayer comes with real baggage: a debt-to-equity ratio of 142% versus 48% at BASF, and the unresolved Monsanto litigation. BASF counters with a free cash flow yield of 5.2% and a dividend yield of 4.4%, while Bayer’s payout is a nominal 0.3%.

Where Bayer does shine is on margins. Its EBITDA margin of 21.5% comfortably beats BASF’s 14.7%, driven by the agriculture and pharma divisions. BASF’s edge lies in balance sheet strength, giving it room to pursue investments such as the planned Verbund site in southern China and maintain its dividend policy.

Two Different Risk Profiles

The risks facing the two companies could hardly be more different. BASF is a cyclical play, sensitive to oil prices and geopolitical tensions that feed into raw material costs. Its heavy exposure to China offers growth potential but also regulatory uncertainty. With a beta of 1.25, the stock moves in tandem with the broader market.

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Bayer’s risks are idiosyncratic. The Monsanto legacy and potential PCB lawsuits dominate the risk profile. A favourable ruling from the US Supreme Court on glyphosate liability this summer could send the stock soaring; an adverse one would strain an already stretched balance sheet. Insider buying in April suggests some management confidence, but the outcome remains a binary event.

What Investors Are Watching Next

For BASF, the immediate catalysts are the conclusion of the buyback programme in June and the second-quarter results that follow. Analysts at Barclays remain cautious, pointing to high energy costs in the European business. A potential IPO of the agribusiness division could provide additional momentum.

The choice between BASF and Bayer in May 2026 is less about valuation and more about temperament. BASF offers income-oriented investors a predictable dividend, solid cash flows, and a clean balance sheet. Bayer offers a high-risk turnaround story where the payoff could be substantial — but only if the legal clouds clear. Stability has its price. Risk does too.

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