There is a lot to be liked about RPM International Inc. (NYSE:RPM) as an income stock. It has paid dividends over the past 10 years. The company currently pays out a dividend yield of 2.5% to shareholders, making it a relatively attractive dividend stock. Should it have a place in your portfolio? Let’s take a look at RPM International in more detail.
5 questions to ask before buying a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Is it the top 25% annual dividend yield payer?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has the amount of dividend per share grown over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
How well does RPM International fit our criteria?
RPM International has a trailing twelve-month payout ratio of 71%, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 32% which, assuming the share price stays the same, leads to a dividend yield of around 2.6%. However, EPS should increase to $2.69, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. RPM has increased its DPS from $0.80 to $1.4 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes RPM a true dividend rockstar.
Relative to peers, RPM International generates a yield of 2.5%, which is high for Chemicals stocks but still below the market’s top dividend payers.
Considering the dividend attributes we analyzed above, RPM International is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. I’ve put together three fundamental factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for RPM’s future growth? Take a look at our free research report of analyst consensus for RPM’s outlook.
- Valuation: What is RPM worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether RPM is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.