What do the following numbers have in common? 139, 496, 51, 62. Give up? One hundred and thirty-nine years ago, in 1883(!), Pittsburgh Plate Glass was founded by Captain John B. Ford and John Pitcairn in Pittsburgh, Pennsylvania. In 1898, it began a streak of paying quarterly dividends that persists to this day, 496 quarters later. With their dividend increase in 1971, it began a streak of increasing the dividend payout annually. On July 21, 2022, they announced a three-cent increase to their 62 cents per share quarterly dividend, marking the 51st consecutive year of increasing their dividend.
Now known as PPG Industries, Inc [PPG], it is the largest paint and coatings company in the world, with 240+ manufacturing facilities in 59 countries and operations in 75 countries. The global headquarters is still in Pittsburgh. I missed the first 50 years of this streak, but I think it’s time to get in on the action.
PPG Industries Inc.
Here is the profile from TD Ameritrade:
PPG Industries, Inc. manufactures and distributes a range of paints, coatings and specialty materials. The Company operates through two segments: Performance Coatings and Industrial Coatings. The Performance Coatings segment primarily supplies a range of protective and decorative coatings, sealants and finishes along with pavement marking products, paint strippers, stains and related chemicals, as well as transparencies and transparent armor. The Industrial Coatings segment primarily supplies a range of protective and decorative coatings and finishes along with adhesives, sealants, metal pretreatment products, optical monomers and coatings, low-friction coatings, precipitated silicas and other specialty materials. Its Performance Coatings brands include PPG, GLIDDEN, COMEX, OLYMPIC, DULUX, SIGMA, HISTOR, SEIGNEURIE, PEINTURES GAUTHIER, and JOHNSTONE’S, among others. Its Industrial Coatings brands include PPG and TESLIN. It supplies its products to customers in an array of end-uses.
The Details
Data as of 2022-08-13
| Name | PPG Industries Inc |
| Ticker | PPG |
| Website | Investor Relations |
| Sector | Materials |
| Dividend Streak | 51 years |
| Last Price | $135.55 |
| Div Amt (quarterly) | $0.62 |
| Ann Dividend | $2.48 |
| Last Ann Div Inc | 8.1% |
| Dividend Yield | 1.8% |
| Payout Ratio (ttm) | 38.5% |
| Beta (5-yr, mon) | 1.17 |
| P/E Ratio (ttm) | 22.1 |
| Margin of Safety | 0% |
PPG has had a strong move up since the launch of Royal Dividends. I won’t lie, I think they’re fairly priced right now trading at their 10-year historical P/E Ratio. However, prior to the pandemic, PPG traded between $100 and $120 for 5 years. Then it broke out to $134.36 to close 2019. Now, 2.5 years later, PPG is at the $135 level again and it took a roller coaster to get here, hitting a low of $70 at the worst of the recession in 2020 and a high of $183 just a little over a year ago. We don’t necessarily have a margin of safety, but we do have more upside potential than downside. Even if its earnings are flat from 2021, those earnings would still be 9% higher than the 2019 level. PPG could easily push past $145 before the next earnings announcement.
PPG has three other things going for it: a low payout ratio, an earnings growth rate of 9% per annum from 2012 through 2021, and management has even bought back a considerable number of shares since 20121. Further, though PPG’s yield is 1.8%, it is the highest yielding Dividend King that gives exposure to the Materials sector. Here is a chance to grab a great company at a fair price, a price that still allows for expected returns in the low double digits over the next 5 years.
I’ve set up a market order to grab 7 shares on Monday morning.
1There are 23% fewer shares outstanding in 2022 than in 2012.