We recently published a list of S&P 500 Dividend Aristocrats List: Sorted By Hedge Fund Sentiment. In this article, we are going to take a look at where The Sherwin-Williams Company (NYSE:SHW) stands against the other S&P 500 dividend aristocrats.
The appeal of dividend growth growth stocks is unmatched. For those considering investing in dividend stocks, growth typically outweighs yield due to the consistent returns they have delivered over the years. Within dividend growth strategies, the dividend aristocrats stand out. Of the approximately 6,000 stocks listed on the NYSE and NASDAQ, only 67 companies earn the title of dividend aristocrats. These companies have consistently increased their dividend payouts for a minimum of 25 consecutive years. They are part of the broader market and are tracked by the Dividend Aristocrat Index.
Also read: 10 Best Dividend-Paying Stocks Under $50
Companies that regularly increase their dividends typically show strong financial health and stability, indicating their consistent profitability. A report by Fortune highlighted that, although it has lagged behind its benchmark, the Dividend Aristocrat Index has surpassed nearly all US active managers over the past decade. Rupert Watts, the head of factors and dividend indices at S&P Dow Jones Indices, discussed dividend growth strategies with the global media organization. Here is what the analyst said:
“Raising your dividend for 25 plus years is no easy feat. These are high-quality companies.”
Dividend aristocrats have delivered impressive returns, surpassing other asset classes. Since the index’s inception in 2005 through September 2023, the dividend aristocrats index has provided a total return of 10.35%, outpacing the broader market’s return of 9.54% for the same period. These stocks are celebrated not only for their dividend growth and steady equity gains but also for their lower volatility. During this timeframe, dividend aristocrats exhibited a volatility level of 15.35%, compared to the market’s slightly higher 16.31%. This indicates that dividend aristocrats tend to have more stable price movements. Their consistent dividend increases over 25 years or more demonstrate their ability to reward shareholders even during tough times, such as the 2007 financial crisis and the 2020 pandemic.
The debate between high yields and dividend growth continues. As of August 19, the High Dividend ETF, which tracks high-yielding companies in the broader market, offers a dividend yield of 4.18%. This yield would have been quite attractive to investors in the past. However, this year the ETF has only returned 4.8%, compared to the market’s 18% return. According to FactSet, investors have withdrawn over $1.1 billion from the fund, which is more than 15% of its $6 billion in assets. This indicates that investors tend to prefer dividend growth over high yields, as high yields are often seen as a sign of financial difficulties. In this article, we will take a look at some of the best dividend aristocrat stocks according to hedge funds.
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 a vibrant paint color being sprayed onto a wooden surface.
The Sherwin-Williams Company (NYSE:SHW)
Number of Hedge Fund Holders: 76
The Sherwin-Williams Company (NYSE:SHW) is an Ohio-based paint and coating manufacturing company that specializes in the manufacturing and production of related products. The stock is up by over 16% this year so far as consumers are moving toward smaller home improvement tasks that they previously overlooked after the pandemic. The consumer enthusiasm was seen in the company’s earnings for the second quarter of 2024. Driven by robust performance in the Paint Stores Group, the company successfully implemented its established strategy, resulting in consolidated sales that met expectations, expanded gross margins, increased EBITDA, and a 12.5% rise in adjusted diluted net income per share. Sales in the Paint Stores Group were notably higher, aligning with the midpoint of the company’s guidance, despite a challenging double-digit comparison. The company generated $6.2 billion in revenues, up modestly 0.5% from the same period last year.
The Sherwin-Williams Company (NYSE:SHW), one of the best dividend aristocrat stocks, currently pays a quarterly dividend of $0.715 per share. The company holds a 45-year track record of consistent dividend growth. In the first six months of 2024, the company returned $1.34 billion to shareholders through dividends and share repurchases. The stock’s dividend yield on August 19 came in at 0.81%.
Although The Sherwin-Williams Company (NYSE:SHW) may not achieve the explosive growth seen in cutting-edge tech stocks, its earnings have demonstrated strong performance. The company is showing resilience in a difficult market. For investors looking for stability in their portfolios, the company presents a compelling choice.
According to Insider Monkey’s database of Q2 2024, 76 hedge funds held stakes in The Sherwin-Williams Company (NYSE:SHW), down slightly from 78 in the previous quarter. These stakes are worth over $4.05 billion in total. Among these hedge funds, D E Shaw was the company’s largest stakeholder in Q2.
Overall SHW ranks 5th on our list of S&P 500 dividend aristocrats. While we acknowledge the potential of SHW 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 SHW 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.