Editor’s note: This column is part of our Best Stocks for 2019 contest. Charles Sizemore’s pick for the contest is LyondellBasell (NYSE:LYB).

One word: Plastics. There’s a great future in plastics. Movie buffs will recognize that line from the 1967 classic The Graduate, starring Dustin Hoffman. But it’s just as relevant today as we jump into 2019, and I expect it to be the key to my winning InvestorPlace’s annual Best Stocks competition. I took the crown in the 2011, 2013 and 2016 contests, and I’m looking to retake my title in 2019.

Before I jump into this year’s pick, let’s do a quick review of my last entry. My pick in the 2018 contest – blue-chip pipeline operator Enterprise Products (NYSE:EPD) – is up a modest 3% year to date as I write this. That’s nothing to get excited about, though for what it’s worth, it’s better than the S&P 500’s return for the year.

Alas, it’s nowhere near good enough to win the contest. Barring an unexpected breakdown, the title this year will likely go to Tracey Ryniec for her recommendation of Etsy (NASDAQ:ETSY), which is up a solid 138%.

Well done, Tracey.

With no further ado, my pick in Best Stocks for 2019 is LyondellBasell (NYSE:LYB), one of the largest plastics, chemicals and refining companies in the world. It’s also one of the cheapest stocks in the S&P 500, has strong insider buying, and has a fantastic history of taking care of its shareholders via dividend hikes and well-timed share repurchases.

LyondellBasell also happens to have just wrapped up a major acquisition of former rival A. Schulman Inc. and is poised to reap the rewards in the years ahead.

If you’re not familiar with the company, LYB produces everything from food packaging to water pipes and auto parts. Additionally, the company is one of the largest crude oil refiners in the United States and produces gasoline, diesel fuel, jet fuel and assorted lubricants. The company sells its products in more than 100 countries and made the 2018 list of “Most Admired Companies” by Fortune magazine.

LyondellBasell stock has had a rocky history. It was formed from a debt-fueled marriage between European Basell Polyolefins and American Lyondell Chemical Company … in 2007 … just before the worst financial crisis in a century. LyondellBasell had to file for chapter 11 bankruptcy in 2009, but emerged in 2010 with a cleaner balance sheet and a new management team.

Since then, it has been smooth sailing. Chemicals are a lumpy, cyclical business but LYB stock has managed to steadily grow its revenues-per-share and earnings-per-share since its 2010 restructuring.

Energy stocks have been beaten up of late due to the falling price of crude oil. With global demand looking suspect and suppliers stronger than ever, the price of crude oil is down by about a third since the beginning of October.

But that’s hardly a bad thing for LyondellBasell. Lower prices for crude oil and natural gas liquids means lower cost of feedstock for the chemicals and refining businesses and thus higher profits.

Not that profits have been in short supply. Over the past five years, LyondellBasell stock has averaged a return on equity of nearly 60%. Net margins fluctuate based on the economic cycle but have averaged in the mid-teens since 2015. Over the trailing 12 months, net margins have held steady at 15.01%.

Despite its financial health, it’s hard to find too many large-cap stocks that are as cheap as LYB stock. The company trades at a trailing price-to-earnings ratio of just 6.02 and a forward P/E of just 8.05. Compare that to the S&P 500’s trailing and forward P/E ratios of 21.98 and 15.1, respectively.

Earnings can be notoriously volatile, particularly for a cyclical company like LyondellBasell. So, for a better gauge, let’s consider the less-volatile price-to-sales ratio. At just 0.9 times sales, LYB trades for less than half the S&P 500’s ratio of 2.

Importantly, this is close to a five-year low for LYB stock. There’s no guarantee the price can’t go lower, of course. But as a general rule, it’s hard to go wrong buying a healthy company when it’s trading near a five-year low in its price-to-sales multiple.

LyondellBasell also looks cheap when measured by its dividend yield. At 4.3%, the yield is close to a five-year high and more than double the dividend yield of the S&P 500.

Of course, a high dividend yield by itself can be a warning sign that the payout is in danger. But in LYB’s case, I see virtually no probability of that happening. The company pays out just 26% of its earnings as dividends. That’s exceptionally conservative and suggests the dividend is safe for the foreseeable future.

Of course, a major factor in the rising dividend yield is the growth of the dividend. The yield is the current annual dividend divided by the current stock price. So the yield can be pushed higher by a rising numerator in the yield or a falling denominator in the stock price. Or, in LyondellBasell’s case, both!

LYB stock has doubled its quarterly dividend over the past years, from 50 cents per share to $1 per share. And given the low payout ratio, there’s plenty of room for continued growth.

Bottom Line on LYB Stock

Of course, there’s more than one way to reward LYB stock owners. In addition to doubling the dividend over the past five years, LYB has also been aggressively buying back its shares, reducing its shares outstanding by nearly a third. I’m generally a skeptic of stock buybacks, as companies often time them horribly and execute them when prices are high rather than low. But in LyondellBasell stock’s case, the company has repurchased its shares at very reasonable prices.

And if you need any additional incentive to buy, consider that the company’s largest shareholder — British/Ukrainian billionaire Leonard Blavatnik, the gentleman that formed LyondellBasell a little over a decade ago — has been making major purchases of the stock on the open market. In November, Blavatnik’s holding company purchased $5.1 million shares worth nearly half a billion dollars.

Now, that’s what I’d call commitment!

I don’t know what the market will bring in 2019. After a rocky year like 2018, I wouldn’t be surprised to see continued turbulence next year. But in LyondellBasell stock, we have a cheap dividend stock that I expect can deliver 20% to 40% returns over the next 12 – 18 months. It may not win the contest. But it’s a stock I want in my portfolio.

As of this writing, Charles Sizemore was long LYB.