Owens Corning Headquarters. Owens Corning develops and produces insulation, roofing, and fiberglass composites.
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Introduction
You may be familiar with my series of articles where I predict annual dividend increases for several long-term dividend growth companies. (If you aren't, you can see them on my profile page.) In general, this involves reviewing a dividend growth company's fundamental performance to predict that company's next dividend increase. However, in the modern stock market, much of a stock's performance is driven by technical factors. If dividend growth investors can grab some capital appreciation along with increasing income, all the better. It can be discouraging to buy a dividend stock and then immediately see its price drop.
With a decade under its belt, Owens Corning (NYSE:OC) is just at the beginning of what is hopefully a long dividend growth streak. And its recent breakout to new highs on Friday, May 24th on what technical analysts describe as a pocket pivot indicates that institutions are still accumulating the stock, despite a more than 65% run up since late October. This continued accumulation reflected in the pocket pivot may indicate even higher prices ahead.
Company Summary
Business
Owens Corning manufactures products for residential and commercial buildings, including roofing and insulation, along with fiberglass composites which are used in building products and in the growing business of wind turbine blades. Since its founding in 1938, the company has grown and now sells its products across 30 countries and has annual sales of nearly $10 billion.
Owens Corning’s business is broken out into three business segments: Roofing, which manufactures and sells shingles and roofing accessories; Insulation, which sells a variety of insulation products under multiple brand names including Owens Corning PINK; and Composites, which sells multiple products to building and construction, renewable energy, and infrastructure markets.
The company posted double-digit growth across all segments in 2021 and 2022 but saw demand fall in its Insulation and Composites business segments in 2023. This drop was more than compensated for by 10% sales growth in its Roofing business segment.
Owens Corning's Dividend Growth Record
Starting with an annual dividend of 64 cents in 2014, the company boosted its annual payout by 4 – 8 cents a year through 2021, at which point Owens Corning began rapidly growing earnings and dividends from the nadir of the pandemic, announcing dividend increases of 35%, 49% and 15%, respectively from 2021 – 2023. At current prices, Owens Corning yields 1.32%. While not sporting a high yield, fast growing stocks often have below-average yields. In this case, you’re trading current yield for a quickly growing dividend.
OC's Dividend Growth History (SeekingAlpha.com Owens Corning Page)
While not yet sporting a long dividend growth record, the company does have a decade of dividend growth under its belt. This consistent record of dividend growth makes it less likely that Owens Corning will cut or eliminate its dividend in the future.
The Case for Higher Prices
Examining the stock chart, we see a breakout on Friday, May 24th to new highs on strong volume. More importantly, the breakout volume met the definition of a pocket pivot. A pocket pivot occurs when a stock’s up day volume exceeds any down day volume over the previous 10 days and is a strong indication of institutional accumulation.
6 month daily chart of OC's stock price (Stockcharts.com, with annotations by the author)
The market is currently in an uptrend. While it’s possible that this is a false breakout, most stocks will follow the overall market trend. The breakout on above average volume, reflected in the pocket pivot, also puts the odds in favor of continued upward movement in the stock. In addition, the stock is not overbought on the Relative Strength Index, having built a base over the last two weeks.
Conclusion
Building material manufacturer Owens Corning has built a decade-long record of dividend growth. The company’s stock is under accumulation, shown by the uptrend since October 2023 and the breakout to new closing highs on above-average volume. Dividend growth investors should take a look at Owens Corning as a potential investment for continued payout growth as well as capital appreciation.
