Top Dividend Growth Stocks: #13 Sherwin Williams

We are counting down the top Dividend Growth Stocks — and we couldn’t “gloss over” Sherwin-Williams (SHW)! Coming in at #13, Sherwin-Williams makes paints, coatings, and related products for professional, industrial, commercial, and retail customers. Primarily operating in North and South America, the Caribbean, Europe, Asia, and Australia, the company has 4,774 company-operated stores. Headquartered in Cleveland, Ohio, The Sherwin-Williams Company was founded in 1866.

Sherwin-Williams Co (SHW) is ‘First Class,’ failing only 1 of 5 Dividend System criteria. It has ‘Premier’ status being in the upper percentiles of this month’s stock universe. The company increased dividends for 42 years, making it a Dividend Aristocrat 25+. We consider SHW to be a Growth stock.

GROWTH:  SHW’s 5-year average dividend growth rate is 13.3%, slightly above the dividend universe average of 12.4%. Free cash flow has grown at an average rate of 18% per year for the last 5 years versus the dividend universe at 8.3%, so SHW is performing very well.

INCOME: SHW’s current dividend yield is .74%, less than half of the average at 2.65%. 

SAFETY: We use the Dividend Coverage Ratio to measure the dividend’s safety – higher is better. SHW has a DCR of 6.5 which is excellent, well above the minimum of 2. 

VALUATION: The price at time of analysis was $716.58, which we consider Overpriced. A fair price based on historical PE ratio and earnings would be around $563.63. The S&P500’s average PE ratio is 38.42, versus SHW’s PE ratio of 32.43,  which is below the S&P 500 average PE, indicating some value, as compared to our dividend universe. Our ‘Value Rating’ for Sherwin-Williams Co is 1.5 out of 5.0, meaning that  both PS and PE indicate the stock is moderately expensive, compared to other dividend stocks available. You would expect it to be a bit expensive with the kind of growth it racks up.

TIMING: Historical Yield and PE tell us that SHW has ‘No ‘buy’ signal.’ Don’t eliminate a stock based on one factor (or lack thereof). 

QUALITY: Our quality formula gives SHW a ‘Quality Rating’ of 4.8 (out of 5), versus the average of 2.7 for this month’s dividend universe.

Compared to all dividend stocks paying 7 years or more of increasing dividends, we rate Sherwin-Williams Co a ‘A+.’

We do want to hear if you would change the color of your portfolio with Sherwin Williams — tell us your portfolio renovation plans in the comments!

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