Up to date on November 2nd, 2024 by Felix Martinez
On October third, 2024, RPM Worldwide (RPM) introduced that it could improve its quarterly dividend for the 51st consecutive yr.
In consequence, it has joined the listing of Dividend Kings.
The Dividend Kings are a gaggle of 53 shares which have elevated their dividends for at the very least 50 years. Given this longevity, we imagine 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 53 Dividend Kings. You possibly can obtain the total listing, together with essential monetary metrics akin to dividend yields and price-to-earnings ratios, by clicking on the hyperlink under:
RPM is a diversified firm and a pacesetter within the supplies sector. We imagine it has a protracted runway of progress forward and may proceed to be relied upon for annual dividend will increase.
This text will talk about 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 prospects. Nearly all of its gross sales are to industrial prospects. Based in 1947, RPM employs greater than 17,000 folks.
Supply: Investor Presentation
The corporate reported document monetary outcomes for Q1 of fiscal yr 2025, with internet earnings reaching $227.7 million and diluted earnings per share (EPS) at $1.77, marking a 13.5% year-over-year progress. Earnings Earlier than Curiosity and Taxes (EBIT) hit $303.9 million, whereas adjusted EBIT rose 6.3% to $328.3 million. Regardless of attaining document profitability, RPM’s income decreased by 2.1% to $1.97 billion, impacted by weaker volumes within the Shopper and Specialty Merchandise teams on account of a downturn in residential markets and hostile foreign money translations, notably in Europe and Latin America. The corporate, nevertheless, achieved strong money circulation, producing $248.1 million in working money for the quarter.
Key efficiency areas included RPM’s Development Merchandise and Efficiency Coatings teams, which posted natural progress pushed by demand for high-performance constructing merchandise. Regardless of going through demand declines in sure segments, Specialty Merchandise and Shopper Teams improved their EBIT margins. The corporate attributes these outcomes to the continued success of MAP 2025, RPM’s operational enchancment initiative, which focuses on value efficiencies, streamlining bills, and leveraging high-margin merchandise. This initiative additionally helped cut back RPM’s debt by $453.1 million over the previous yr and has enhanced working capital, with RPM attaining a 250-basis-point enchancment in working working capital as a share of gross sales.
Wanting ahead, RPM expects Q2 gross sales to stay flat however anticipates adjusted EBIT progress within the mid-single digits, pushed by MAP 2025 efficiencies and progress in non-residential development. The fiscal 2025 outlook stays unchanged, with anticipated low-single-digit income progress and adjusted EBIT progress within the mid-single- to low-double-digit vary. The corporate notes that whereas residential markets proceed to indicate softness, ongoing efforts in high-performance infrastructure initiatives and value administration are anticipated to assist sustained profitability and money circulation enchancment all through the fiscal yr.
Development Prospects
Lately, progress has been a lot steadier. From fiscal yr 2014 to fiscal yr 2024, earnings per share grew at a fee of 8.9% per yr, which has accelerated to 9.5% during the last 5 years.
Factoring within the power of latest outcomes with the possible declines in earnings throughout the subsequent recession, we now forecast annual earnings progress of seven%, up from 5%, by fiscal yr 2029.
Natural income progress is predicted to be the first contributor. Increasing revenue margins will even be key to the corporate’s future EPS progress.
Supply: Investor Presentation
Development slowed over the last recession, however RPM maintained and elevated its dividend funds to shareholders even in an hostile financial local weather.
Aggressive Benefits & Recession Efficiency
RPM is a number one producer and distributor of paints, coatings, development chemical substances, colorants, and adhesives to customers, contractors, and development companies. As a consequence of will increase in development and residential enchancment spending, these companies carry out effectively when the economic system is rising.
Nevertheless, RPM could be very prone to recessions. You possibly can see the corporate’s earnings-per-share efficiency throughout the Nice Recession under:
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 atmosphere.
RPM isn’t recession-proof, as proven by its decline in earnings and the time it took for earnings progress to return following the final recession. The corporate additionally has a excessive degree of debt that would 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’s projected dividend payout ratio is 47% for 2025. RPM has raised its dividend for 51 consecutive years.
Valuation & Anticipated Whole Returns
Primarily based on the anticipated EPS of $5.54 for 2025, RPM inventory trades for a price-to-earnings ratio of twenty-two.9. We reaffirm our goal P/E of twenty-two 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 to commerce with this a number of by fiscal 2029, then valuation can be a 3% headwind 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, the corporate’s dividend funds will increase whole returns. RPM shares presently yield 1.6%.
General, RPM’s anticipated whole returns could possibly be composed of:
7.0% earnings-per-share progress
1.6% dividend yield
3% a number of compression
Whole anticipated annual returns are forecasted at 5.6% per yr over the following 5 years. We now fee RPM a maintain.
Ultimate Ideas
RPM Worldwide continues to ship record-setting outcomes, a powerful feat contemplating the corporate’s progress charges final fiscal yr. The corporate additionally has a powerful dividend progress streak.
With anticipated returns just under our 10% purchase threshold, we presently fee RPM inventory a maintain.
In case you are enthusiastic about discovering extra high-quality dividend progress shares appropriate for long-term funding, the next Certain Dividend databases might be helpful:
The main home inventory market indices are one other stable useful resource for locating funding concepts. Certain Dividend compiles the next inventory market databases and updates them month-to-month:
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