Dow Chemical Increases Stock Buyback Plan

Dow Chemical, the latest target of an activist hedge fund manager, announced measures on Wednesday intended to make shareholders happy.

The company said it would expand its authorized buyback program this year to $4.5 billion worth of stock from $1.5 billion. It also said it would increase its first-quarter dividend by 5 cents, to 37 cents a share. The moves, Dow said, were part of its previously announced strategy.

Wall Street was paying particularly close attention to the announcement because of recent moves by Daniel S. Loeb, the hedge fund manager who runs Third Point. In a letter to his investors last week, Mr. Loeb said he had taken a large stake in Dow Chemical and urged the company to hire outside advisers to study a possible spinoff of its petrochemical business.

Mr. Loeb also suggested in the letter that the company should consider a large share buyback. “As Dow management looks to further its journey in unlocking value for shareholders, it now has the balance sheet flexibility to consider a meaningful share buyback,” the letter said.

Dow was silent on Wednesday on Mr. Loeb’s proposal that it separate its petrochemical operations.

“The board’s actions today finalize a decision that it has been reviewing on an ongoing basis with particular focus over the last several quarters,” Andrew N. Liveris, Dow’s chairman and chief executive, said in a statement.

In a separate announcement, the company said it swung to a profit in the fourth quarter of 2013. Net income rose to $963 million from a loss of $716 million in the period a year earlier.

Excluding certain one-time items, the company’s quarterly profit was 65 cents a share, exceeding expectations of 43 cents a share among analysts polled by Thomson Reuters.

Shares of Dow Chemical rose about 5 percent in early trading on Wednesday.

“Dow’s fourth-quarter and full-year performance is the result of successful execution against our stated goals and commitments throughout the year,” Mr. Liveris said. “Our strategy and actions are delivering record cash flow and we remain squarely focused on increasingly rewarding shareholders, funding high-return organic growth projects and further enhancing our capital structure.”