PPG Industries: Attractively Valued

PPG is a leading manufacturer of coatings and resins, flat and fiber glass, and Industrial and specialty chemicals.

PPG Industries is a dividend aristocrat as well as a component of the S&P 500 index. It has been increasing its dividends for the past 36 consecutive years. From the end of 1997 up until August 2008 this dividend growth stock has delivered an annual average total return of 4.40 % to its shareholders.

Click charts to enlarge

 

At the same time the company has managed to deliver an 1.20% average annual increase in its EPS since 1998.

The ROE has ranged between 16% and 27% with the exception of a brief spike down in 2001 and 2002.

Annual dividend payments have increased over the past 10 years by an average of 4.00% annually, which is much higher than the growth in EPS. A 4% growth in dividends translates into the dividend payment doubling almost every 18 years. If we look at historical data, going as far back as 1987, PPG has actually managed to double its dividend payment every ten years on average.

If we invested $100,000 in PPG on December 31, 1997 we would have bought 1850 shares. In February 1998 your quarterly dividend income would have been $629. If you kept reinvesting the dividends instead of spending them, your quarterly dividend income would have risen to $1318.20 by August 2008. For a period of 10 years, your quarterly dividend income would have increased by 53%. If you reinvested it though, your quarterly dividend income would have increased by 110%.

 

The dividend payout has largely remained under 60% over our study period, with the exception of the brief spike to 70% in 2001. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

I think that PPG is attractively valued with its low price/earnings multiple of 16 and low DPR as well as an attractive yield.

Disclosure: I do not own shares of PPG.

Comments

[Plowboy:]

PPG has 1970's management, a foul and unethical company, and is dead money at best. What is this guy smoking. I worked there... look at the chart and guess again.

Let's see....an old American company, seeped in the car business, that's getting it's ass kicked by everyone that makes paint...See, It's PPG!

2008 Aug 25 09:16 PM

[NNP:]

Hmmm, perhaps you were fired??

2008 Aug 26 09:41 AM

[Jon Dought:]

Stock prices has been flat for over 12 years. This Company was doing a stock split about once every 5 years until 12 years ago when the stock was at @ $75 a share. Over the next 12 years it has hit $80 + only 1 time, last year for about a 2 weeks. Otherwise the stock has not moved from the $50 to $60 price range. I only wonder what they are doing with the mirrors?

2008 Aug 27 01:54 PM

[FUNNY FARMER:]

Funny how the stock goes up just before the CEO's and other upper mgt. sells then it goes back down again......Check out insider trading! Used to be a good company to work for when management cared about more than their stock values and reaping rewards that will reflect in their personal paychecks. (Just like other big corporations)

2008 Sep 04 09:35 AM

[Jon Dought:]

I would like to know how PPG can pay dividends every quarter if there stock price is staying flat? If this is a good company to add the your investments I would have thought that over the last 3 or so years some smart money would have been buying? There must be some reason that the markets are not buying.
Mr. Stoyanov, How much of this stock do you own? Are you with the company? I have not seen anything, looking at there stock prices, any reason, other than there pay of dividends. I would think I am buying stock to add to my overall bank account. 35 cents a share won't do that!

2008 Sep 04 12:45 PM

[Dividend Gr...:]

Mr Dought, please check my disclosure for your questions.
The dividend is $2.08/share/year which is a pretty decent yield. The company has increased dividends for over 3 decades. The eps is expected to be over $5 in 08 and about $6 in 09. I would say the dividend is well covered.
The stock has been flat over the past decade but let's face it the S&P 500 has been flat as well.

2008 Sep 06 07:40 PM