We recently compiled a list of the 10 Dividend Zombies and Kings with Longest Dividend Payouts. In this article, we are going to take a look at where PPG Industries, Inc. (NYSE:PPG) stands against the other dividend stocks.
Last year, artificial intelligence (AI) was the main focus in the markets, driving tech stocks to the forefront. These stocks rose by nearly 56%, accounting for the majority of the market’s gains. However, these trends quickly lose popularity once they emerge. Experienced long-term investors understand a crucial principle: while chasing short-term investment trends can often lead to disappointment, committing to a long-term strategy can yield success. As AI-related companies drove the market upward, the valuations of high dividend-paying companies quietly declined in comparison. It is not about attractive valuations of dividend stocks, these stocks also offer diversification benefits and the potential for a growing income stream, especially if the Fed decides to lower interest rates, making them a strong investment option. These stocks become more attractive when companies have a solid history of consistently paying and increasing their payouts. Read our list of Best Dividend Kings to Buy for Safe Dividend Growth.
Dividend zombies are companies that have paid dividends to shareholders for at least 100 consecutive years whereas dividend kings are companies boasting 50 years of dividend growth. Dividend growers have shown strong performance over the years, often surpassing the overall market returns. The Dividend Aristocrats index, which tracks the performance of companies with 25 consecutive years or more, has outperformed the broader market since its inception in 2005, with lower levels of volatility. Historically, the index has captured 90% of the market’s upward movements while experiencing only 82% of its declines. Currently, the Aristocrats are trading at a price-to-earnings multiple that is more than 10% lower than that of the broader market. This discount level has historically preceded prolonged periods of superior performance by the Aristocrats.
Since the end of 1989, there have been six calendar years where the broader market experienced negative performance. In each of these years, the Dividend Aristocrat index surpassed the performance of the broader equity benchmark by an average of 13.28%. Remarkably, the aristocrats delivered positive total returns in three of those years.
Given investors’ preference for dividend stocks, companies listed in the broader market indices are consistently increasing and sustaining their dividend payments. In the first quarter of 2024, the S&P’s main index distributed $151.6 billion in dividends, compared to $146.8 billion in Q1 2023. There were 796 reported dividend increases in the first quarter, totaling $22.7 billion, up from $19.7 billion in the prior-year period.
The impressive returns of dividend growers clearly demonstrate their strong performance. In this article, we will take a look at dividend zombies and dividend kings to invest in.
Our Methodology:
For this list, we selected companies that have paid dividends for over 100 years and also have strong dividend growth histories. Some of these companies are dividend kings, which means that they have raised their payouts for 50 years or more. We also considered the hedge fund sentiment around each stock, according to Insider Monkey’s database for Q1 2024. The stocks are ranked in ascending order of the consecutive years of dividend payments. 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)
Consecutive Years of Dividend Payments: 125
PPG Industries, Inc. (NYSE:PPG) is a Pennsylvania-based paint and coat manufacturing company that offers a wide range of related products and services. The company has benefitted a lot from its European exposure. In the early 1900s, it was one of the first US companies to expand its operations into Europe by acquiring a glass plant in Belgium. Throughout the 1920s, the company experienced sustained growth driven by its glass and paint divisions, which mainly benefitted from the expanding automotive industry and the construction of skyscrapers. It expects its demand to stabilize in Europe for the second quarter of 2024 and continued growth in China and Mexico.
Since the start of 2024, PPG Industries, Inc. (NYSE:PPG) has declined by over 13% due to investor disappointment with the mixed first-quarter earnings and worries about weak growth. Despite this, the company’s management expects low single-digit organic sales growth for the year. They believe that increased demand from China and India will help balance out the declines in Europe and other markets.
ClearBridge’s Large Cap Value Strategy highlighted PPG Industries, Inc. (NYSE:PPG)’s European exposure in its Q2 2023 investor letter. Here is what the firm said:
“We were fairly active in the quarter as market dislocations allowed us to be opportunistic, while focusing on companies with stronger moats, better pricing power, more predictable long-term growth and higher returns. In the materials sector we exited PPG Industries, Inc. (NYSE:PPG) and initiated a position in Sherwin-Williams. While both companies operate in the paint and coating industry and are benefiting from improving margins as raw material prices have come down of late, we believe Sherwin-Williams’ dominant retail footprint affords it better pricing power through the cycle. The company provided conservative 2023 guidance and has been successfully gaining market share in the pro segment. While PPG has more European and industrial exposure, Sherwin-Williams’ residential and more domestic focus should also benefit the company as housing indicators appear to be troughing. Weak housing in the face of higher mortgage rates caused Sherwin-Williams stock to sell off in the first quarter, creating a compelling investment opportunity for long-term focused fundamental investors.”
PPG Industries, Inc. (NYSE:PPG), one of the best dividend zombies on our list, has been rewarding shareholders with growing dividends for the past 125 years. In addition, the company is a Dividend King with 52 consecutive years of dividend growth under its belt. The company pays a quarterly dividend of $0.65 per share for a dividend yield of 2.03%, as recorded on June 20.
As of the close of Q1 2023, 35 hedge funds in Insider Monkey’s database reported having stakes in PPG Industries, Inc. (NYSE:PPG), down from 39 in the preceding quarter. These stakes are collectively worth nearly $758 million.
Overall PPG ranks 9th on our list of the dividend zombies and kings with longest dividend payouts. You can visit 10 Dividend Zombies and Kings with Longest Dividend Payouts to see the other dividend stocks that are on hedge funds’ radar. While we acknowledge the potential of PPG as an investment, our conviction lies in the belief that 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 as promising as 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.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These 10 Stocks in June.
Disclosure: None. This article is originally published at Insider Monkey.