Wednesday, April 23, 2008

RPM Dividend Analysis

RPM International, Inc., through its subsidiaries, engages in the manufacture, marketing, and sale of various specialty chemical products to industrial and consumer markets worldwide. It operates in two segments, Industrial and Consumer.
The company is a high yield dividend aristocrat as well as a component of the S&P 500 index. It has been increasing its dividends for the past 34 consecutive years. From 1998 up until 2007 this dividend growth stock has delivered an annual average total return of 7.70 % to its shareholders.

At the same time company has managed to deliver a 7.70% average annual increase in its EPS since 1998. The majority of the gains in EPS occurred in recent years; this indicator was stuck in a range for the majority of the time of this study.

The ROE has remained in the 5 -20% range over the past 10 years with the exception of the 2006. It has closely tracked the fluctuations in EPS.

Annual dividend payments have increased over the past 10 years by an average of 5.4% annually, which is lower than the growth in EPS. A 5.4% growth in dividends translates into the dividend payment doubling almost every 13 years. If we look at historical data, going as far back as 1984, RPM has actually managed to double its dividend payment every eight years on average.

If we invested $100,000 in RPM on December 31, 1997 we would have bought 7072 shares. In January 1998 your quarterly dividend income would have equaled $792. If you kept reinvesting the dividends though instead of spending them, your quarterly dividend income would have risen to $1939 by October 2007. For a period of 10 years, your quarterly dividend income has increased by 70 %. If you reinvested it though, your quarterly dividend income would have increased by 145%.

The dividend payout has remained above 50% for the majority of our study period with the exception of 2004 and 2007. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

I think that RPM is attractively valued with its low price/earnings multiple of 19 and low DPR. The company also boasts an above average dividend yield.

Disclosure: I own shares of RPM

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