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PPG Industries' Dividends: Will Shareholders Be Pleased?

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PPG Industries' Dividends: Will Shareholders Be Pleased? PART 1 OF 5

PPG Industries Increased Its Quarterly Dividend after 5 Quarters

PPG Industries raised its quarterly dividend

PPG Industries (PPG) is all set to pay its 3Q17 dividend of $0.45 per share on September 12, 2017. Investors who held the stock on or before August 10, 2017, are eligible for this dividend, which will be payable on the company’s outstanding shares as of the record date of August 10, 2017.

PPG Industries Increased Its Quarterly Dividend after 5 Quarters

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Dividend growth

PPG’s dividend of $0.45 for 3Q17 represents a 12.5% rise over 3Q16. The company effected a stock split in 2Q15. The dividend per share has fallen since 3Q15. Adjusting for the stock split, since 2012, PPG’s dividend has risen at a CAGR (compound annual growth rate) of ~7.8%.

Free cash flows

Free cash flows are very important in order for companies to finance their dividend payments, debt payments, expansion plans, and other activities. Let’s see if PPG’s free cash flow is strong enough to support its dividend growth. For a better understanding, we’ll convert PPG’s free cash flow into free cash flow per share. When adjusted for the stock split, PPG’s free cash flow per share stood at $2.40 at the end of 2Q17. Since 2012, its free cash flow per share has been on a declining trend, from $9.21 in 2012 to $4.30 in 2016 (adjusted for stock splits). That indicates that free cash flows generated by PPG might make it difficult to manage the company’s dividend growth, since a big portion of PPG’s free cash flow goes to pay dividends, leaving little for other requirements.

Investors can hold PPG industries indirectly by investing in the Materials Select Sector SPDR ETF (XLB), which has invested 4.3% in PPG. The other holdings of the fund include Dow Chemical (DOW), DuPont (DD), and Monsanto (MON) with weights of 11.8%, 11.7%, and 8.4%, respectively, as of August 25, 2017.

In the next part, we’ll look at PPG’s dividend yield and dividend payout.

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