Why Is Sherwin-Williams’ Dividend Yield Falling?



Sherwin Williams’ dividend yield

A dividend yield is a measure of a company’s annual dividend per share relative to its price per share. It indicates how much cash an investor is getting for every dollar invested in a company’s equity. A high dividend yield is a good sign because it provides investors with stable income.

As of February 27, 2017, Sherwin-Williams’ (SHW) stock price closed at $310.20. With Sherwin-Williams declaring a quarterly dividend of $0.85 per share in 1Q17, its current dividend yield stands at 1.10%. Sherwin-Williams’ peers PPG Industries (PPG), RPM International (RPM), and Valspar (VAL) have dividend yields of 1.6%, 2.2%, and 1.3%, respectively. Currently, its peers have a better dividend yield.

The fall in Sherwin-Williams’ dividend yield is primarily due to an increase in its share price. Sherwin-Williams’ share price outpaced its dividend growth. However, its dividend yield is still higher than the yield on one-year Treasury bills.

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Dividend payout

Dividend payout can be calculated by dividing annual dividend per share by annual EPS (earnings per share). It’s expressed as a percentage. The dividend payout tells investors what percentage of earnings the company is paying out as a dividend.

Sherwin-Williams’ EPS growth outpaced its dividend growth. As a result, Sherwin-Williams’ dividend payout has been falling. In 2012, its dividend payout was at 37.7%. In 2016, the dividend payout fell to 30.1%. A lower and stable payout ratio is preferred because the company will be left with a higher amount to reinvest for future growth.

Notably, investors can hold Sherwin-Williams indirectly by investing in the Guggenheim S&P 500 Equal Weight Materials ETF (RTM). RTM invested 4.4% of its holdings in Sherwin-Williams as of February 27, 2017.

In the next part, we’ll look into analysts’ latest ratings for Sherwin-Williams.


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