Sherwin-Williams (NYSE:SHW) Is Paying Out A Larger Dividend Than Last Year

The Sherwin-Williams Company (NYSE:SHW) has announced that it will be increasing its periodic dividend on the 14th of March to $0.79, which will be 10% higher than last year's comparable payment amount of $0.715. Although the dividend is now higher, the yield is only 0.8%, which is below the industry average.

Check out our latest analysis for Sherwin-Williams

Sherwin-Williams' Projected Earnings Seem Likely To Cover Future Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, prior to this announcement, Sherwin-Williams' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 32.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 23% by next year, which is in a pretty sustainable range.

Sherwin-Williams Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.733 in 2015, and the most recent fiscal year payment was $2.86. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Sherwin-Williams has seen EPS rising for the last five years, at 14% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Sherwin-Williams Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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 instance, we've picked out 1 warning sign for Sherwin-Williams that investors should take into consideration. 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.