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RPM International Boosts Shareholder Value, Hikes Dividend

Zacks Equity Research

RPM International Inc. RPM recently announced a 2.9% hike in its quarterly cash dividend to 36 cents per share. The raised dividend will be paid on Oct 31, 2019, to its shareholders on record as of Oct 15, 2019. Notably, the dividend yield, based on the new payout and the last closing market price, is approximately 2.14%.   

The company has been increasing dividends for quite some time now. Notably, it has been raising dividends since 1985. The latest increase marks RPM International’s 46th consecutive year of dividend hike, reflecting its strong cash position and solid balance sheet.

Efforts to Enhance Shareholders’ Value

Shares of RPM International have underperformed its industry so far this year. However, the company’s effort to enhance shareholders’ value and its 2020 MAP to Growth operating improvement plan are encouraging.

RPM International is intensely focused on driving its shareholders’ value through regular dividend hikes and share repurchase program. As part of the aforesaid program, the company repurchased approximately $100 million of its common shares during the first quarter of fiscal 2020. This is in addition to the $200 million it repurchased in fiscal 2019.

Additionally, RPM International had cash and cash equivalents as of Aug 31, 2019, of $212.1 million compared with $202.2 million a year ago. Long-term debt (excluding current maturities) at the end of the fiscal first quarter was $2.02 billion compared with $2.27 billion in the comparable prior-year quarter.

Notably, the company has returned approximately $2.4 billion worth of cash dividends to its stockholders since the inception of its dividend payout policy.

Robust Initiatives to Drive Growth

RPM International’s 2020 MAP to Growth plan is likely to drive its overall performance in the long run. The plan includes efforts to reduce costs by closing plants, merging IT system, centralizing more of its back-office functions and rationalizing its manufacturing footprint.

Moreover, acquisition is an important part of RPM International’s growth strategy. In the fiscal first quarter of 2020, acquisitions added 2.3% to total net sales. On Jun 13, 2019, Tremco Commercial Sealants & Waterproofing unit had acquired two Hudson, NH-based businesses namely, Schul International Co., LLC and Willseal LLC. The said buyouts not only strengthened Tremco’s position as a global market leader but also places RPM International in a leading position for impregnated foam tape technology.

For fiscal 2020, the company expects its revenue growth to be relatively modest mainly due to global macroeconomic factors. It believes that sales growth will drive strong leverage to earnings, backed by operating improvement initiatives and fiscal 2019 price increases. Raw material cost inflation is likely to be moderate.

Zacks Rank & Key Picks

RPM International currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the Construction sector include M.D.C. Holdings, Inc. MDC, Meritage Homes Corporation MTH and Taylor Morrison Home Corporation TMHC, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

M.D.C. Holdings and Meritage Homes have three-five year expected EPS growth rate of 9.9% and 8.5%, respectively.

Taylor Morrison surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the average beat being 41.8%.

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