The board of PPG Industries, Inc. (NYSE:PPG) has announced that it will be increasing its dividend by 5.1% on the 10th of September to $0.62, up from last year's comparable payment of $0.59. The payment will take the dividend yield to 1.8%, which is in line with the average for the industry.
PPG Industries' Payment Has Solid Earnings Coverage
Unless the payments are sustainable, the dividend yield doesn't mean too much. The last payment was quite easily covered by earnings, but it made up 158% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.
The next year is set to see EPS grow by 106.6%. If the dividend continues on this path, the payout ratio could be 27% by next year, which we think can be pretty sustainable going forward.
PPG Industries Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $1.14 in 2012 to the most recent total annual payment of $2.36. This implies that the company grew its distributions at a yearly rate of about 7.5% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that PPG Industries has grown earnings per share at 11% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.
In summary, while it's always good to see the dividend being raised, we don't think PPG Industries' payments are rock solid. While PPG Industries is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for PPG Industries (1 shouldn't be ignored!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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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.
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