Dividend Growth Stock Overview: RPM International, Inc.

About RPM International Inc.

RPM Dividend Growth

RPM’s stable of leading brands includes Rust-Oleum, which has the #1 market share in several segments of the small project paint market.
Photo courtesy Daniel Oines/flickr.com.

RPM International, Inc. is a multinational holding company with subsidiaries that manufacture and market coatings, sealants and specialty chemicals. The company has 94 manufacturing facilities in 24 countries and sells products in 160 countries around the world.

RPM’s sales are divided between the industrial segment and the consumer segment. The industrial segment provided 63% of the company’s total 2013 sales. Major brands in the industrial segment include Carboline corrosion control and fireproofing coatings, Fibergrate fiberglass reinforced plastic grating, and Stonhard and Flowcrete flooring systems.

The consumer segment markets to customers in North America, Australia, and the United Kingdom and includes major brands such as Rust-Oleum rust preventative paints and coatings, DAP caulks, sealants and patch products, and Zinsser primer-sealers, wallcovering and removal products, and mildew-resistant paints. The consumer segment provided 37% of RPM’s total sales in 2013.

RPM’s name comes from the company’s heritage. In 1947, Frank C. Sullivan founded Republic Powdered Metals to manufacture and sell a heavy-duty aluminum roof coating called Alumination. After Sullivan died in 1971, Republic Powdered Metals was transformed into RPM, Inc., in order to create a holding company to support a more aggressive acquisition program in the paint and coatings industry. RPM has aggressively pursued acquisitions across the industry, purchasing over 70 companies in the last decade, and 80 companies in the two decades prior to that.

Two of the more recent acquisitions provide good examples of the targets that the company looks for. In June 2014, RPM acquired Betumat Quimica Ltda., a manufacturer of waterproofing products based in Brazil with annual net sales of approximately $22 million. This acquisition expands RPM’s footprint in northern Brazil. In July 2014, RPM purchased Krud Kutter, a $13 million (net sales) manufacturer of cleaners and removers for residential and industrial environments.

RPM recorded net sales and income of $4.38 billion and $291.7 million in fiscal year 2014, which ended May 31, 2014. These were up significantly from 2013, when the company had a one-time adjustment due mainly to a write down of investments in India, accrual of loss reserves for a roofing division settlement with the U.S. General Services Administration, and plant closings due to additional efficiencies for RPM’s Rust-Oleum’s and Stonhard businesses. From fiscal year 2012 (the last year without a special write down), 2014 numbers were up by 15.9% for net sales and 35.1% for net income. Earnings per share were up 33.3% from FYs 2012 to 2014.

The company is a member of the S&P Mid Cap 400 index and S&P’s High Yield Dividend Aristocrats index, and trades under the ticker symbol RPM.

RPM’s Dividend and Stock Split History

RPM Dividend Growth

Through strategic acquisitions, RPM has grown dividends since 1974.  The company has compounded dividend growth at 5.5% for the last decade.

RPM has increased dividends since 1974 and traditionally announces and pays annual increases in October. The company’s most recent dividend increase was in October 2014 when the company announced an 8.3% increase in its quarterly dividend, from 24 cents to 26 cents per share, for an annualized rate of $1.04 per share. I expect RPM to announce its next dividend increase in October 2015.

RPM has established a history of moderate dividend increases. For more than the last two decades, RPM has increased dividends year-over-year between 1% and 9%. Prior to 1992, RPM had increased dividends annually by at least 10% and often by much more. From 1974 to 1991, RPM increased the annual dividend payout more than 67-fold, from a split-adjusted 0.4 cents to more than 27 cents per share. As just mentioned, the dividend growth has slowed to single digit percentages since then. This is reflected in RPM’s compounded annual dividend growth rate (CADGR) over the last 5 to 25 years. The company’s 5-year CADGR is 4.01%, its 10-year CADGR is 5.57%, and its 20-year and 25-year CADGRs are 5.45% and 6.22%, respectively. Since beginning to pay dividends in 1974, RPM’s CADGR is 14.74%.

RPM has paid out multiple stock dividends since increasing the cash dividend payout beginning in 1974. There have been five 5-for-4 stock dividend payouts and six 3-for-2 stock dividend payouts. The 5-for-4 stock dividend payouts were in October 1983, November 1984, November 1990, November 1995 and the most recent stock dividend in November 1997. The 3-for-2 stock dividend payouts were in October 1975, October 1976, October 1977, October 1978, October 1987, and November 1992.

Over the 5 years ending on December 31, 2014, RPM stock appreciated at an annualized rate of 24.1%, from a split-adjusted $17.26 to $50.71. This significantly outpaced both the 13.0% annualized return of the S&P 500 and the 14.9% annualized return of the S&P Mid Cap 400 index during this time.

RPM’s Direct Purchase and Dividend Reinvestment Plans

RPM has both direct purchase and dividend reinvestment plans. The company makes the plans very favorable for investors – first, there is no fee to start investing through the plans. Second, RPM picks up all the fees associated with purchasing shares, either directly or through the reinvestment of dividends. If you’re a new investor to the plan, the minimum investment is $200. For additional investments, your minimum is $25 per purchase.

When selling shares, you’ll pay 10 cents per share sold plus a transaction fee of between $15 and $30, depending on the type of sell order you request. You’ll also pay an additional $5 to have the sales proceeds directly deposited to your account.

Helpful Links

RPM International’s Investor Relations Website

Current quote and financial summary for RPM International (finviz.com)

Information on the direct purchase and dividend reinvestment plans for RPM

Want to find out about more great dividend growth stocks?

Check out the list of current S&P Dividend Aristocrats.

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