We recently published a list of 12 Best Safe Dividend Stocks for 2025. In this article, we are going to take a look at where The Sherwin-Williams Company (NYSE:SHW) stands against other best safe dividend stocks for 2025.

The year 2024 was exceptional for US stocks, with the broader market climbing over 23% and the tech-focused NASDAQ gaining 29%. These impressive results were driven by the “Magnificent 7” group of stocks, which rose nearly 67%, alongside several other large-cap stocks. It marked the second consecutive year of over 20% gains for the broader market, a feat not seen since the late 1990s. Analysts and investors are optimistic about the market’s future, as 2024 demonstrated remarkable strength, suggesting the positive trend could continue. However, despite the current upbeat outlook, investor sentiment could shift quickly due to factors such as global tensions, economic developments, or unforeseen events.

No matter how the market trends, investors tend to gravitate towards safe stocks that offer stability, particularly during challenging times. Among these secure investment choices, dividend stocks are especially favored. These stocks are typically issued by companies with a reliable history of consistent dividend payments, often from well-established sectors such as utilities, consumer goods, or healthcare.

READ ALSO: 10 Best Dividend Kings Stocks to Invest in Now

Historical analysis consistently shows that dividend stocks tend to outperform other asset classes across various market cycles. A report by T. Rowe Price highlighted that since 1926, dividends have accounted for nearly one-third of the total equity returns for US stocks. From 1980 to 2019, a period marked by a significant decline in interest rates, dividends contributed to 75% of the returns from the broader market.  The report further mentioned that dividends become especially valuable in a low-interest-rate environment, offering a steady cash flow when other fixed-income options are less attractive. Once companies start paying dividends, they rarely stop, and most increase their payouts over time. Paying dividends can make a stock more appealing to investors, potentially boosting its value. Over the last decade, dividends for the benchmark index have grown annually, with an average compound growth rate of just over 7%. In strong markets, dividends have enhanced total returns, while in years with low or negative returns, such as 2020 and 2022, dividends played a larger role in total returns, helping to bolster portfolio resilience.

Regarding the safety of dividend stocks, analysts recommend that investors prioritize dividend growth rather than chasing yield traps. Dan Lefkovitz, a strategist with Morningstar’s Index team, stressed the importance of focusing on dividend growth, highlighting that it is a distinct strategy from high-dividend investing. He explained that dividend growth reflects a company’s strong competitive position and positive future prospects. A dividend growth portfolio tends to align more closely with the overall market in terms of sector distribution and growth versus value characteristics, such as price-to-earnings ratios. While it has a value-oriented approach, it is more balanced and core-focused compared to a high-dividend portfolio.

Companies with a history of consistently raising their dividends have typically outperformed those that don’t pay dividends, all while experiencing less volatility. While dividends are not guaranteed and can fluctuate, especially in the current environment, they have played a substantial role in enhancing overall equity returns over the years.

Our Methodology

For this article, we scanned Insider Monkey’s database of 900 hedge funds as of Q3 2024 to find stocks with sustainable payout ratios popular among hedge funds. Our focus was on companies that consistently distribute dividends to their shareholders. From this initial selection, we narrowed down the list to include only those companies with a 5-year average payout ratio below 60%, indicating a robust cash position. Subsequently, we identified the top 10 companies meeting these criteria and arranged them in ascending order of the number of hedge funds that held stakes in each of them.

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).

The Sherwin-Williams Company (NYSE:SHW)

Number of Hedge Fund Holders: 78

5-Year Average Payout Ratio: 28%

The Sherwin-Williams Company (NYSE:SHW) is an American paint and coating manufacturing company, based in Ohio. The company specializes in the manufacturing and production of related products. It is a strong dividend payer, having raised its payouts for 45 consecutive years. The company’s quarterly dividend comes in at $0.715 per share and has a dividend yield of 0.85%, as of January 13.

In the third quarter of 2024, The Sherwin-Williams Company (NYSE:SHW) posted mixed earnings, with revenues reaching $6.16 billion, a modest year-over-year increase of 0.75%. Sales in the Consumer Brands Group declined due to continued weakness in the North American DIY market. However, the Paint Stores Group saw growth, fueled by a high single-digit rise in protective and marine product sales. Investments in residential repainting helped maintain mid-single-digit growth, despite the tough market conditions.

The Sherwin-Williams Company (NYSE:SHW) is up by 12% in the past 12 months. Its growth was also highlighted by Parnassus Investments in its Q3 2024 investor letter:

“The Sherwin-Williams Company (NYSE:SHW) gained on optimism that lower interest rates would spur a resurgence in home renovations, leading to higher sales of its paint products. The company also hosted an investor day where it gave medium-term financial targets that were well received by investors.”

As a consistent dividend grower, The Sherwin-Williams Company (NYSE:SHW) holds a strong cash position. In the first nine months of the year, the company generated an operating cash flow of $2.22 billion and returned $1.97 billion to shareholders through dividends.

Insider Monkey’s database of Q3 2024 showed that 78 hedge funds held stakes in The Sherwin-Williams Company (NYSE:SHW), up from 76 in the previous quarter. These stakes are worth over $4.63 billion in total. Among these hedge funds, Viking Global was the company’s leading stakeholder in Q3.

Overall, SHW ranks 7th on our list of best safe dividend stocks for 2025. While we acknowledge the potential for SHW to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SHW but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock. 

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Disclosure: None. This article is originally published at Insider Monkey.