We recently compiled a list of 10 Best Dividend Aristocrats According to Wall Street Analysts. In this article we are going to take a look at where PPG Industries, Inc. (NYSE:PPG) stands against the other dividend aristocrats.
Shifts in investment trends have revealed new insights for investors in recent years. Certain times call for specific investments, and it’s often experienced investors who can spot these opportunities. However, it’s clear that the value of a good investment remains steady, even amidst ongoing changes. This is where the long-standing dividend aristocrats play a role. These companies are strong dividend payers, having raised their payouts for at least 25 consecutive years.
The extended periods of dividend increases have significantly boosted the impressive returns of these stocks over time. Since its inception in 2005, the Dividend Aristocrats Index has outperformed the broader market with lower volatility, according to a report by ProShares. In addition, these stocks demonstrated strong performance in all market conditions, capturing 90% of market gains while only experiencing 82% of market declines. Also read: 10 Best Dividend Aristocrats with Over 3% Yield.
Achieving 25 consecutive years of dividend growth is quite an accomplishment. Out of approximately 6,000 stocks listed on the NYSE and Nasdaq, only 67 are part of the prestigious Dividend Aristocrats index in 2024. This highlights that only a small number of companies have reached this milestone. Maintaining a record of annual dividend increases for 25 years means the company has managed to boost shareholder payouts through various challenges, including the dot-com bubble, the 2007 financial crisis, and the pandemic. This reflects a robust business model, strong cash flow visibility, and disciplined management of capital. Even dividend aristocrats can struggle with consistency, as we’ve seen recently. Companies like Walgreens and 3M were unable to sustain their decades-long dividend growth streaks and have been removed from the Dividend Aristocrats club this year. This highlights the importance of financial strength for dividend aristocrats. The Great Financial Crisis exposed the financial vulnerabilities of these dividend-growers, as 17 out of the 60 Aristocrats in the S&P 500 were removed in 2008 and 2009.
As mentioned before, dividend aristocrats have consistently outperformed the broader market since their inception, even during market downturns. Don Kilbride, a senior managing director and portfolio manager at Wellington Management, has noted this performance, particularly with the Vanguard Dividend Growth fund, which he manages. This fund focuses on companies that have reliably increased their dividends annually, some for decades. During the 2008 market crash, while the market fell 37%, Vanguard Dividend Growth only lost about two-thirds of that amount, thanks to its dividend-generating stocks. As the market recovered, the fund quickly made up for its losses, outperforming many of its peers. Kilbride further mentioned that dividend growth is crucial for weathering tough markets and achieving long-term success, stating that its benefits are substantial and enduring.
According to analysts, for those building their portfolios, incorporating dividend investments can be beneficial, particularly if the dividends are reinvested. By using dividends to purchase additional shares each time they are received, investors create a cycle where payouts increase with the number of shares owned, leading to the ability to acquire even more shares. In this article, we will take a look at some of the best dividend aristocrat stocks according to analysts.
Our Methodology:
For our list, we first scanned a list of the best dividend aristocrat stocks, which are the companies that have raised their dividends for 25 consecutive years or more. From this group, we picked stocks with a projected upside potential of over 10% based on analyst price targets. The stocks are ranked according to their upside potential, as of August 7. We also measured hedge fund sentiment around each stock according to Insider Monkey’s database of 920 funds as of Q1 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A close-up of an artist carefully applying a coat of paint to a wood structure.
PPG Industries, Inc. (NYSE:PPG)
Analyst Upside Potential as of August 7: 25.1%
PPG Industries, Inc. (NYSE:PPG) is an American paint and coating manufacturing company that provides a wide range of related services and products. The stock is down by over 18% since the start of 2024 due to investors’ disappointment in the company’s quarterly earnings. In the second quarter of 2024, the company’s organic sales were flat but showed growth in different segments. It generated $4.8 billion in revenues, which fell by 1.6% from the same period last year and also missed analysts’ estimates by $130 million. That said, its segment margins increased by 110 basis points compared to the previous year, marking the seventh consecutive quarter of margin growth.
PPG Industries, Inc. (NYSE:PPG) has greatly benefited from its European presence. In the early 1900s, it was among the first U.S. companies to expand into Europe by acquiring a glass plant in Belgium. During the 1920s, it saw steady growth thanks to its glass and paint divisions, which were fueled by the booming automotive industry and the construction of skyscrapers. Looking ahead, the company anticipates demand in Europe to stabilize in the second half of the year, while it expects continued growth in China and Mexico.
When evaluating PPG Industries, Inc. (NYSE:PPG) for dividends, investors view it as a favorable choice. Its trailing twelve-month operating cash flow came in at $2.1 billion and levered free cash flow was $1.37 billion. On July 18, the company hiked its quarterly dividend by 4.6% to $0.68 per share. This marked the company’s 53rd consecutive year of dividend growth, which makes PPG one of the best dividend aristocrat stocks on our list. As of August 7, the stock has a dividend yield of 2.26%.
At the end of the March quarter of 2024, 35 hedge funds tracked by Insider Monkey held stakes in PPG Industries, Inc. (NYSE:PPG), down from 39 in the previous quarter. These stakes are valued at nearly $758 million in total. Among these hedge funds, First Eagle Investment Management was the company’s leading stakeholder in Q1.
Overall PPG ranks 4th on our list of the best dividend aristocrats to buy according to Wall Street Analysts. While we acknowledge the potential of PPG as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued dividend stock that is more promising than PPG but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.
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Disclosure: None. This article is originally published at Insider Monkey.