Sherwin-Williams' (NYSE:SHW) Dividend Will Be Increased To $0.605

The board of The Sherwin-Williams Company (NYSE:SHW) has announced that it will be paying its dividend of $0.605 on the 2nd of June, an increased payment from last year's comparable dividend. Even though the dividend went up, the yield is still quite low at only 1.0%.

See our latest analysis for Sherwin-Williams

Sherwin-Williams' Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. However, Sherwin-Williams' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 38.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 25%, which is in the range that makes us comfortable with the sustainability of the dividend.

Sherwin-Williams Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was $0.52 in 2013, and the most recent fiscal year payment was $2.42. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. Earnings has been rising at 4.3% per annum over the last five years, which admittedly is a bit slow. If Sherwin-Williams is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Sherwin-Williams Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Sherwin-Williams is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Sherwin-Williams (1 is potentially serious!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.