Revealed on November third, 2023 by Bob Ciura

On October fifth, 2023, RPM Worldwide (RPM) introduced that it was rising its quarterly dividend for the fiftieth consecutive years.

In consequence, it has joined the listing of Dividend Kings.

The Dividend Kings are a gaggle of simply 51 shares which have elevated their dividends for no less than 50 years in a row. Given this longevity, we consider the Dividend Kings are among the many highest-quality dividend progress shares to purchase and maintain for the long run.

With this in thoughts, we created a full listing of all 51 Dividend Kings. You’ll be able to obtain the complete listing, together with vital monetary metrics corresponding to dividend yields and price-to-earnings ratios, by clicking on the hyperlink beneath:

 

RPM is a diversified firm and a pacesetter within the supplies sector. We consider it has an extended runway of progress up forward, and that it will possibly proceed to be relied upon for annual dividend will increase.

This text will focus on the corporate’s enterprise overview, progress prospects, aggressive benefits, and anticipated returns.

Enterprise Overview

RPM Worldwide manufactures, markets and distributes chemical merchandise to industrial, retail and specialty clients. Nearly all of gross sales are made to industrial clients. RPM was based in 1947 and employs greater than 15,000 individuals.

Supply: Investor Presentation

On October 4th, 2023, RPM reported earnings outcomes for the primary quarter of fiscal yr 2024 for the interval ending August thirty first, 2023. For the quarter, income grew 4.1% to a primary quarter file $2.01 billion, which was $40 million above estimates. Adjusted earnings-per-share of $1.64 in comparison with $1.47 within the prior yr, which was $0.10 higher than anticipated.

Three out of 4 segments of the corporate produced file income for the primary quarter. Companywide, natural gross sales improved 3.9% for the interval. Income for the Shopper Group elevated 1.5% to $670 million. This section had natural progress of 1.7% on account of pricing motion.

The Building Merchandise Group grew 10.8% to $783 million. This section had natural progress of 9.5% on account of energy in restoration programs for roofing and parking constructions. Efficiency Coatings Group income was up 4.1% to $379 million.

Natural gross sales had been up 4.0% as infrastructure associated companies noticed greater demand. Income of $181 million for Specialty Merchandise Group was a ten.7% lower year-overyear due as soon as once more to decrease volumes in these companies that serve OEM markets. Natural gross sales declined 9%.

RPM now expects gross sales to be up a low single-digit for fiscal yr 2024, which is down from a projection of mid-single digit progress. We forecast earnings-per-share of $4.98 for the fiscal yr, up from $4.92 beforehand. This might be a 15.8% improve from the prior yr.

Progress Prospects

Lately, progress has been a lot steadier. From fiscal yr 2014 to fiscal yr 2023, earnings per share grew at a price of seven.0% per yr. That progress price has accelerated to 10.1% over simply the final 5 years.

Factoring within the energy of latest outcomes with the doubtless declines in earnings in the course of the subsequent recession, we now forecast annual earnings progress of seven%, up from 5%, by means of fiscal yr 2029.

Natural income progress is anticipated to be the first contributor. Increasing revenue margins may even play a key position within the firm’s future EPS progress.

Supply: Investor Presentation

Progress slowed over the past recession, however RPM was capable of keep and improve its dividend funds to shareholders even in an adversarial financial local weather.

Aggressive Benefits & Recession Efficiency

RPM is a number one producer and distributor of paints, coatings, building chemical compounds, colorants and adhesives to shoppers, contractors, and building companies. These companies carry out nicely when the economic system is rising because of the will increase in building and residential enchancment spending.

Nevertheless, RPM may be very inclined to recessions. You’ll be able to see the corporate’s earnings-per-share efficiency in the course of the Nice Recession beneath:

• 2007 earnings-per-share of $1.64
• 2008 earnings-per-share of $0.36 (78% decline)
• 2009 earnings-per-share of $0.93 (158% improve)
• 2010 earnings-per-share of $1.39 (49% improve)

As you’ll be able to see, the corporate’s earnings-per-share declined considerably in 2008, however recovered within the following two years because the economic system emerged from the recession.

We anticipate this recession-resistant Dividend King to carry out equally throughout future downturns within the enterprise setting.

RPM is just not recession proof, as proven by the corporate’s decline in earnings, and within the time that it took for earnings progress to return to the corporate following the final recession. The corporate additionally has a excessive degree of debt that might make acquisitions or excessive dividend progress troublesome if earnings had been to weaken.

From a dividend perspective, RPM’s dividend additionally seems very protected.

Supply: Investor Presentation

The corporate has a projected dividend payout ratio of 37% for 2023. RPM has raised its dividend for 50 consecutive years.

Valuation & Anticipated Complete Returns

Based mostly on anticipated EPS of $4.98 for 2023, RPM inventory trades for a price-to-earnings ratio of 19.4. We reaffirm our goal P/E of 20 as that is extra in-line with the long-term common valuation and displays the standard of earnings outcomes over the previous few years.

If the inventory had been commerce with this a number of by fiscal 2029, then valuation could be a 0.6% tailwind to annual returns over this era.

The opposite main element of RPM’s future whole returns would be the firm’s earnings-per-share progress. We anticipate 7% annual EPS progress for the corporate.

Lastly, whole returns will obtain a lift from the corporate’s dividend funds. RPM shares presently yield 2%.

Total, RPM’s anticipated whole returns could possibly be composed of:

• 7.0% earnings-per-share progress
• 2.0% dividend yield
• 0.6% a number of reversion

Complete anticipated annual returns are forecasted at 9.6% per yr over the subsequent 5 years. We now price RPM a maintain.

Last Ideas

RPM Worldwide continues to ship file setting outcomes, a formidable feat contemplating the expansion charges that the corporate skilled final fiscal yr. The corporate has a formidable dividend progress streak as nicely.

With anticipated returns slightly below our 10% purchase threshold, we presently price RPM inventory a maintain.

In case you are thinking about discovering extra high-quality dividend progress shares appropriate for long-term funding, the next Certain Dividend databases will probably be helpful:

The most important home inventory market indices are one other strong useful resource for locating funding concepts. Certain Dividend compiles the next inventory market databases and updates them month-to-month: