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RPM International’s Free Cash Flow Trend

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Jan. 11 2019, Updated 9:40 a.m. ET

RPM International’s free cash flow

In the previous part, we discussed RPM International’s (RPM) dividend rates and dividend growth.

In this part, we’ll discuss RPM International’s free cash flow trend to see whether the company’s free cash flow can sustain its strong dividend growth plans.

RPM International has been generating positive free cash flows. Since 2015, RPM International has generated an average free cash flow of $284.60 million. So far in fiscal 2019, RPM International has generated free cash flows of $90.5 million.

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RPM International’s free cash flow grew in 2016 and declined ~27.8% in 2017. In 2018, RPM International’s free cash flow grew 6.1% compared to the previous year. PPG Industries (PPG), Sherwin-Williams (SHW), and Axalta (AXTA) have generated free cash flows of $441 million, $1.02 billion, and $136 million in the first nine months of 2018.

Free cash flows and dividend growth

Analyzing the data from 2015, RPM International has used 54% of its free cash flows generated to pay dividends. There’s still a good part of the company’s free cash flows left. The free cash flows can be used for other financing activities like share buybacks and debt reduction. RPM International’s free cash flows can support the current dividend growth.

Investors could hold RPM International indirectly by investing in the First Trust Materials AlphaDEX Fund (FXZ). FXZ has invested 2.7% of its portfolio in RPM International as of January 10.

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