1 Great Dividend You Can Buy Right Now
May 4th 2012 11:35AM
Updated May 4th 2012 11:36AM
Dividend stocks are everywhere, but many just downright stink. In some cases, the business model is in serious jeopardy, or the dividend itself isn't sustainable. In others, the dividend is so low it's not even worth the paper your dividend check is printed on. A solid dividend strikes the right balance of growth, value, and sustainability.
Today, and one day each week for the rest of the year, we're going to look at one dividend-paying company that you can put in your portfolio for the long term without too much concern. This isn't to say these stocks don't share the same macro risks that other companies have, but they are a step above your common grade of dividend stock. Here is last week's selection.
No, RPM International isn't involved with racing in any way, nor will they put sharks with freakin' laser beams attached to their heads within your grasp. What RPM will do is supply the commercial and consumer end user with coatings, sealants, and building materials for their properties. It may not be the most exciting business, but I'll show you why it's a very profitable one for RPM.
In RPM's most recently ended quarter, the company reported a 14% increase in sales with both its industrial and consumer segments exhibiting strong growth.
For the industrial segment, RPM noted strength in both its European and U.S. operations as the reason why it grew 5% organically. A rebound in commercial construction played a huge role in RPM's strengthening figures which is in line with the 33% rise in new orders we witnessed from Lennar (NYS: LEN) in its recent quarter and the 21% rise in new homes delivered as reported by D.R. Horton (NYS: DHI) .
On the consumer side of the business, RPM reported an 18% jump in sales thanks to a rebound in consumer spending, the introduction of new products, and market share gains.
All told, RPM, much like I described when I featured Home Depot (NYS: HD) three months ago in this very same series, will benefit greatly from new homes being built, but it also receives a boost in its bottom line from homeowners who choose to simply renovate or remodel their homes. This is a win-win scenario for RPM International and Home Depot.
38 reasons to like RPM
But, let's get to the nitty-gritty of why RPM makes a compelling buy: its dividend.
RPM International is among a very elite group of companies that have raised their dividend annually for at least the past 25 years. In RPM's case, the company has raised its dividend for 38 consecutive years. According to RPM's own press release, only 46 of some 19,000 publicly traded companies in the U.S. have streaks equal to or longer than RPM's.
Source: RPM Investor Relations. *2012 figure is estimated based on a $0.215 quarterly payout.
Sure, that dividend isn't going to grow as fast as some of the companies featured in this series, but let's face it, where else are you going to find a company tied to the housing market that actually increased its dividend during the worst housing downturn in 70 years? RPM's yield of 3.2% is more than double the industry average of 1.3% and also more than double on of its closest competitors, Valspar (NYS: VAL) , which has raised its dividend for 30 straight years.
We don't have to look for the strongest growth to get the best dividends. Sometimes, it's just as simple as finding well-run companies that understand how to grow efficiently (both organically and by acquisitions). RPM could be the perfect stock for the set-it-and-forget-it investor.
If you're craving even more dividend ideas, I invite you to download a copy of our latest special report, "Secure Your Future With 9 Rock-Solid Dividend Stocks," which is loaded with income-producing companies hand-selected by our top analysts. Best of all, this report is free, so don't miss out!
At the time this article was published Fool contributor Sean Williams has no material interest in any of the companies mentioned in this article. You can follow him on Motley Fool CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.Motley Fool newsletter services have recommended buying shares of Home Depot. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy that'll put a metaphorical roof over your head.
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