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The board of The Sherwin-Williams Company (NYSE:SHW) has announced that it will pay a dividend on the 8th of December, with investors receiving $0.605 per share. This means the annual payment will be 0.9% of the current stock price, which is lower than the industry average.
Check out our latest analysis for Sherwin-Williams
Sherwin-Williams' Earnings Easily Cover The Distributions
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, Sherwin-Williams was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to rise by 25.8% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 23% by next year, which is in a pretty sustainable range.
Sherwin-Williams Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2013, the dividend has gone from $0.667 total annually to $2.42. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
The Dividend Has Growth Potential
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Sherwin-Williams has seen EPS rising for the last five years, at 7.3% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Sherwin-Williams' prospects of growing its dividend payments in the future.
Sherwin-Williams Looks Like A Great Dividend Stock
In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Sherwin-Williams that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.