We ranked May’s universe of dividend stocks based on a variety of factors that we consider “results oriented.” Sherwin Williams came out on top.
We consider SHW to be a Growth Stock.
Value and Price
Based on estimated future EPS growth of 14.86% per year for the next five years (source), a discount rate of 9% (we use the total return of the index ETF SPY as our discount rate, also called minimum required rate of return), we calculate SHW’s intrinsic value at $357. The average of analyst’s price targets are $309; with the current price at around $270, we see the potential for growth ahead. The PE ratio is 39.5, so it’s pricey, as most high growth stocks tend to be.
Sherwin Williams has delivered an average of 21.45% total return per annum for the last 10 years! Even if their growth rate dropped 25%, it would still be 50% higher growth than the market as whole, as represented by the ETF SPY. SHW’s 10 year free cash flow growth rate has averaged 17% per year, and dividends averaged 15.7% growth per year over the same period. These are the reasons why we rate SHW a 5.0 our of 5.0 for growth.
SHW’s dividend produces a low yield (which you would expect from a dividend growth stock), a long dividend streak (44+ years!),
The stock’s performance is very reliable. We feel they have too much debt but a low payout ratio gives them wiggle room. Their volatility as measured by a beta of 1.14 is higher than the market, so price oscillations will be a bit more extreme (do you like roller coasters?) Nevertheless, SHW gets an A- for ‘Excellent’ performance when compared to this month’s dividend universe.
What do you think? Please let us know in the comments.