I Have High Hopes for This Top Dividend Stock to Become a Dividend King Before 2030

[Pelican Press 0]

This is the hidden content, please

• Sign In
• or
• Sign Up

I Have High Hopes for This Top Dividend Stock to Become a Dividend King Before 2030

Over the past decade, Sherwin-Williams (NYSE: SHW) has coated investors’ portfolios with outsize gains — producing a total return of 419% compared to 243% for the S&P 500. In addition to its strong stock performance, the company has been growing its dividend at a breakneck pace.

Earlier this year, Sherwin-Williams announced an 18.2% dividend raise — marking the 45th consecutive year of increasing its payout. That puts it on track to become a Dividend King by 2029.

This is the hidden content, please

• Sign In
• or
• Sign Up

are S&P 500 companies that have paid and raised their dividends for

This is the hidden content, please

• Sign In
• or
• Sign Up

.

Here’s why Sherwin-Williams is an excellent blue chip dividend stock to buy now.

data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///ywAAAAAAQABAAACAUwAOw==

Image source: Getty Images.

A primer on Sherwin-Williams

Sherwin-Williams is a conglomerate whose portfolio extends far beyond its flagship Sherwin-Williams label. Other notable brands include Valspar (paints, stains, sealers), Minwax (wood finishes), Purdy (paint products and tools), Krylon (spray paint), Thompson’s WaterSeal (multi-surface sealers, cleaners), Cabot (stains, bleaching oils), Ronseal (wood stains, paints), and others.

Sherwin-Williams makes corrosion-resistant coatings for commercial vessels and the marine industry to protect against harsh and humid environments. It sells to residential, commercial, and industrial customers, which adds a layer of diversification to its business model and helps protect against the cyclicality of its end markets.

For example, Home Depot is facing stagnating sales due to reduced spending on home improvement as home sales volumes decline. Like Home Depot, Sherwin-Williams benefits from a hot housing market and consumer spending on home improvement and do-it-yourself projects, but its business is diverse enough to where its results aren’t wholly dependent on the strength of the consumer.

This is the hidden content, please

• Sign In
• or
• Sign Up

SHW Revenue (TTM) Chart

Sherwin-Williams is generating all-time high revenue and diluted earnings per share (EPS) as margins have recovered. The company saw its revenue surge between 2019 and 2021 due to a flurry of spending on goods and home improvement projects. But as you can see in the chart, earnings dipped in the years that followed, and revenue growth stalled.

But Sherwin-Williams has, once again, kicked into a new growth gear. The company is putting up impressive results at a time when many consumer-facing materials and industrial companies are not. For example, tools maker Stanley ****** & Decker has been in a multi-year downturn and is restructuring its business.

In sum, Sherwin-Williams is performing despite some challenges. Its full-year guidance calls for $10.85 to $11.35 diluted EPS — which excludes an $0.80-per-share acquisition-related amortization expense. If Sherwin-Williams hits the midpoint of that guidance, it would have a P/E ratio of 28.6 based on full-year results. It’s not a sky-high price for the company, but it is on the expensive side. However, Sherwin-Williams tends to be an expensive stock, with a 31 median P/E ratio over the last 10 years and a more than 33 median P/E over the previous three to seven years.

Story continues

A results-orientated dividend

The following chart does a good job of showcasing Sherwin-Williams’ approach to its dividend.

This is the hidden content, please

• Sign In
• or
• Sign Up

SHW Revenue (TTM) Chart

Over the last five years, the company has grown its dividend and earnings at practically the same rate and far faster than revenue — implying the business is becoming more efficient. You’ll also notice that the payout ratio has gone down over the last five years, thanks to strong earnings growth. The payout ratio is just 27% — meaning that $0.27 for every dollar in earnings is going toward dividend payments. A payout ratio of 50% is generally considered healthy — so Sherwin-Williams’ dividend is affordable.

Aside from the dividend, Sherwin-Williams uses buybacks as a key way to reward shareholders. Over the past 10 years, it has reduced its share count by 12%, grown the dividend nearly fourfold, and the stock has produced a mind-numbing 372% return — far outpacing the S&P 500 and Nasdaq Composite.

This is the hidden content, please

• Sign In
• or
• Sign Up

SHW Chart

During that *******, Sherwin-Williams gave shareholders an 18.8% average annual return. It’s unlikely it will be able to replicate those gains now that it is a much larger company. But still, management deserves credit for its excellent track record of allocating capital to grow the business and make savvy acquisitions.

Sherwin-Williams is a balanced buy

At first glance, Sherwin-Williams may seem like a boring business with a valuation that is too high and a yield that is too low. However, a deeper ***** shows that the company does much more than make interior paints.

Sherwin-Williams isn’t overpriced compared to its historical valuation. And given management’s commitment to the payout, we should expect to see earnings and the dividend continue to grow at roughly same pace.

All told, Sherwin-Williams is an excellent blue chip dividend stock to buy now, and there’s every reason to think it can become a Dividend King by 2029.

Should you invest $1,000 in Sherwin-Williams right now?

Before you buy stock in Sherwin-Williams, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 

This is the hidden content, please

• Sign In
• or
• Sign Up

for investors to buy now… and Sherwin-Williams wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $722,626!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

This is the hidden content, please

• Sign In
• or
• Sign Up

*Stock Advisor returns as of July 15, 2024

This is the hidden content, please

• Sign In
• or
• Sign Up

has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot. The Motley Fool recommends Sherwin-Williams. The Motley Fool has a

This is the hidden content, please

• Sign In
• or
• Sign Up

.

This is the hidden content, please

• Sign In
• or
• Sign Up

was originally published by The Motley Fool

This is the hidden content, please

• Sign In
• or
• Sign Up

#High #Hopes #Top #Dividend #Stock #Dividend #King

This is the hidden content, please

• Sign In
• or
• Sign Up

This is the hidden content, please

• Sign In
• or
• Sign Up