Up to date on November 2nd, 2024 by Felix Martinez
On October third, 2024, RPM Worldwide (RPM) introduced that it could enhance its quarterly dividend for the 51st consecutive 12 months.
Because of this, it has joined the record of Dividend Kings.
The Dividend Kings are a gaggle of 53 shares which have elevated their dividends for no less than 50 years. Given this longevity, we consider the Dividend Kings are among the many highest-quality dividend development shares to purchase and maintain for the long run.
With this in thoughts, we created a full record of all 53 Dividend Kings. You may obtain the complete record, together with essential monetary metrics akin 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 a protracted runway of development forward and might proceed to be relied upon for annual dividend will increase.
This text will focus on the corporate’s enterprise overview, development prospects, aggressive benefits, and anticipated returns.
Enterprise Overview
RPM Worldwide manufactures, markets, and distributes chemical merchandise to industrial, retail, and specialty prospects. The vast majority of its gross sales are to industrial prospects. Based in 1947, RPM employs greater than 17,000 folks.
Supply: Investor Presentation
The corporate reported report monetary outcomes for Q1 of fiscal 12 months 2025, with internet earnings reaching $227.7 million and diluted earnings per share (EPS) at $1.77, marking a 13.5% year-over-year development. Earnings Earlier than Curiosity and Taxes (EBIT) hit $303.9 million, whereas adjusted EBIT rose 6.3% to $328.3 million. Regardless of reaching report profitability, RPM’s income decreased by 2.1% to $1.97 billion, impacted by weaker volumes within the Client and Specialty Merchandise teams resulting from a downturn in residential markets and antagonistic forex translations, significantly in Europe and Latin America. The corporate, nevertheless, achieved strong money stream, 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 development pushed by demand for high-performance constructing merchandise. Regardless of going through demand declines in sure segments, Specialty Merchandise and Client Teams improved their EBIT margins. The corporate attributes these outcomes to the continuing 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 scale back RPM’s debt by $453.1 million over the previous 12 months and has enhanced working capital, with RPM reaching 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 development within the mid-single digits, pushed by MAP 2025 efficiencies and development in non-residential development. The fiscal 2025 outlook stays unchanged, with anticipated low-single-digit income development and adjusted EBIT development within the mid-single- to low-double-digit vary. The corporate notes that whereas residential markets proceed to point out softness, ongoing efforts in high-performance infrastructure initiatives and price administration are anticipated to help sustained profitability and money stream enchancment all through the fiscal 12 months.
Progress Prospects
In recent times, development has been a lot steadier. From fiscal 12 months 2014 to fiscal 12 months 2024, earnings per share grew at a fee of 8.9% per 12 months, which has accelerated to 9.5% during the last 5 years.
Factoring within the energy of latest outcomes with the seemingly declines in earnings throughout the subsequent recession, we now forecast annual earnings development of seven%, up from 5%, by way of fiscal 12 months 2029.
Natural income development is predicted to be the first contributor. Increasing revenue margins may also be key to the corporate’s future EPS development.
Supply: Investor Presentation
Progress slowed over the last recession, however RPM maintained and elevated its dividend funds to shareholders even in an antagonistic financial local weather.
Aggressive Benefits & Recession Efficiency
RPM is a number one producer and distributor of paints, coatings, development chemical compounds, colorants, and adhesives to customers, contractors, and development companies. Attributable to will increase in development and residential enchancment spending, these companies carry out effectively when the financial system is rising.
Nonetheless, RPM could be very inclined to recessions. You may see the corporate’s earnings-per-share efficiency throughout 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% enhance)
2010 earnings-per-share of $1.39 (49% enhance)
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 financial system emerged from the recession.
We count on this recession-resistant Dividend King to carry out equally throughout future downturns within the enterprise atmosphere.
RPM shouldn’t be recession-proof, as proven by its decline in earnings and the time it took for earnings development to return following the final recession. The corporate additionally has a excessive degree of debt that might make acquisitions or excessive dividend development tough 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 complete returns would be the firm’s earnings-per-share development. We count on 7% annual EPS development for the corporate.
Lastly, the corporate’s dividend funds will increase complete returns. RPM shares at present yield 1.6%.
General, RPM’s anticipated complete returns could possibly be composed of:
7.0% earnings-per-share development
1.6% dividend yield
3% a number of compression
Whole anticipated annual returns are forecasted at 5.6% per 12 months over the following 5 years. We now fee RPM a maintain.
Remaining Ideas
RPM Worldwide continues to ship record-setting outcomes, a powerful feat contemplating the corporate’s development charges final fiscal 12 months. The corporate additionally has a powerful dividend development streak.
With anticipated returns just under our 10% purchase threshold, we at present fee RPM inventory a maintain.
In case you are enthusiastic about discovering extra high-quality dividend development shares appropriate for long-term funding, the next Positive Dividend databases will likely be helpful:
The foremost home inventory market indices are one other stable useful resource for locating funding concepts. Positive Dividend compiles the next inventory market databases and updates them month-to-month:
Thanks for studying this text. Please ship any suggestions, corrections, or inquiries to help@suredividend.com.
