April 23, 2025 a 12:46 pm
SHW: Dividend Analysis - The Sherwin-Williams Company
The Sherwin-Williams Company, a leader in the paint and coating industry, exemplifies a track record of consistent dividend distributions and prudent financial management. With a robust dividend history of 41 years, Sherwin-Williams enjoys a solid reputation as a reliable dividend payer. This analysis assesses the company's dividend yield, growth, and underlying financial health to provide investors with insights into its future dividend sustainability and overall financial strength.
📊 Overview
Sherwin-Williams stands out in the Materials sector with a commitment to shareholder returns through dividends. The dividend yield of 0.91% paired with a current dividend per share of 2.85 USD demonstrates its ability to provide returns, albeit at a moderate yield compared to industry leaders. Having maintained a 41-year dividend history without cuts reflects its resilient business model even during challenging economic times.
| Metric | Value |
|---|---|
| Sector | Materials |
| Dividend Yield | 0.91% |
| Current Dividend per Share | 2.85 USD |
| Dividend History | 41 years |
| Last Cut or Suspension | None |
🗣️ Dividend History
The importance of such a consistent dividend history cannot be overstated, serving as a testament to Sherwin-Williams' stability and management's commitment to returning capital to shareholders. This stability is crucial for investors looking for reliability in their income streams.
| Year | Dividend Per Share (USD) |
|---|---|
| 2025 | 1.58 |
| 2024 | 2.86 |
| 2023 | 2.42 |
| 2022 | 2.4 |
| 2021 | 2.2 |
📈 Dividend Growth
Evaluating the growth rate of dividends over successive periods indicates Sherwin-Williams' capability to enhance investor returns. The continuous increase in dividends over both 3 and 5 years points to confidence in its cash flow generation and profitable operations.
| Time | Growth |
|---|---|
| 3 years | 9.14% |
| 5 years | 13.68% |
The average dividend growth is 13.68% over 5 years. This shows moderate but steady dividend growth.
✅ Payout Ratio
The payout ratios offer insight into how sustainable the current dividend policy is considering earnings and free cash flow. A lower ratio suggests that the company retains more profits for growth.
| Key Figure | Ratio |
|---|---|
| EPS-based | 26.82% |
| Free cash flow-based | 34.36% |
The EPS payout ratio of 26.82% and FCF payout ratio of 34.36% indicate a comfortable cushion for continuing dividends, with room for potential increases or business reinvestments.
⚖️ Cashflow & Capital Efficiency
Understanding cash flows and capital efficiency is critical for evaluating the company's capability to service its dividends and drive future growth. Free Cash Flow and Earnings Yield ratios are vital for assessing operational profitability.
| Year | 2024 | 2023 | 2022 |
|---|---|---|---|
| Free Cash Flow Yield | 2.41% | 3.31% | 2.08% |
| Earnings Yield | 3.10% | 3.00% | 3.30% |
| CAPEX/Operating Cash Flow | 33.93% | 25.22% | 33.57% |
| Stock-based Compensation/Revenue | 0.60% | 0.51% | 0.45% |
| FCF/Operating Cash Flow Ratio | 66.07% | 74.77% | 66.43% |
These data suggest strong cash retention capabilities by converting a substantial portion of earnings into free cash flow, ensuring capital efficiency and dividend safety.
🏦 Balance Sheet & Leverage Analysis
A careful assessment of the balance sheet and leverage ratios highlights the company's long-term solvency and financial flexibility. It's crucial to evaluate these figures to gauge the risk levels inherent in its capital structure.
| Year | 2024 | 2023 | 2022 |
|---|---|---|---|
| Debt-to-Equity | 2.94 | 3.18 | 4.03 |
| Debt-to-Assets | 0.50 | 0.51 | 0.55 |
| Debt-to-Capital | 0.75 | 0.76 | 0.80 |
| Net Debt to EBITDA | 3.10 | 2.78 | 3.10 |
| Current Ratio | 0.79 | 0.83 | 0.99 |
| Quick Ratio | 0.46 | 0.48 | 0.55 |
| Financial Leverage | 5.83 | 6.18 | 7.28 |
The declining trend in debt ratios supports a gradual deleveraging, enhancing the balance sheet strength and providing a buffer against economic volatilities.
🔍 Fundamental Strength & Profitability
The analysis of profitability ratios is vital for understanding the fundamental earning power and operational efficiency of Sherwin-Williams.
| Year | 2024 | 2023 | 2022 |
|---|---|---|---|
| Return on Equity | 66.19% | 64.29% | 65.12% |
| Return on Assets | 11.35% | 10.41% | 8.94% |
| Net Margin | 11.61% | 10.36% | 9.12% |
| EBIT Margin | 16.29% | 15.30% | 13.44% |
| EBITDA Margin | 16.33% | 18.00% | 17.94% |
| Gross Margin | 48.47% | 46.67% | 42.10% |
| R&D to Revenue | 0.00% | 0.85% | 0.54% |
The strong return figures underscore significant capital efficiency while maintaining robust profitability margins, which align with strategic operational practices.
📉 Price Development
🔢 Dividend Scoring System
| Criteria | Score | Bar |
|---|---|---|
| Dividend Yield | 3 | |
| Dividend Stability | 5 | |
| Dividend Growth | 4 | |
| Payout Ratio | 5 | |
| Financial Stability | 4 | |
| Dividend Continuity | 5 | |
| Cashflow Coverage | 4 | |
| Balance Sheet Quality | 4 |
Total Score: 34/40
📝 Rating
In conclusion, The Sherwin-Williams Company presents a compelling investment case for dividend-seeking investors. With a strong track record of dividend payments, impressive growth history, reasonable payout ratios, and a stable financial foundation, Sherwin-Williams continues to uphold its reputation in the market place. It offers an attractive blend of steady income and growth potential, albeit with a relatively modest yield. Investors targeting reliable dividends with growth-oriented prospects might find Sherwin-Williams a suitable candidate for their portfolios.