PPG Industries, Inc. (PPG): Dividends Since 1899 (& More Growth Ahead)

Balance Sheet, Dividends, and Share Repurchase

PPG Industries, Inc. (NYSE:PPG) has a strong balance sheet. At the end of the first quarter, the company had cash and cash equivalents of $1.03 billion and total debt of $4.26 billion, down from $4.64 billion a year earlier.

The total debt to capital ratio was at 0.45. PPG’s debt is rated A3 stable by Moody’s, A- stable by Standard & Poor’s, and A- stable by Fitch.

The company’s solid balance sheet bodes well for further cash returns to shareholders.

PPG Industries has paid uninterrupted annual dividends since 1899.

On April 21, the board of directors of PPG approved a 4-cents-per-share increase in the company’s dividend, declaring a regular quarterly dividend of 40 cents per share. PPG’s last quarterly dividend increase was 7%, in the second quarter of 2015. This marks the company’s 471st consecutive dividend payment. Frank Sklarsky, PPG executive vice president and chief financial officer, explained:

“This 11-percent increase in our per-share quarterly dividend reaffirms PPG’s commitment to sustainable dividend increases as an integral part of our capital allocation strategy.”

The forward annual dividend yield is at 1.5%, and the payout ratio is only 27.2%. The company’s recent dividend history is shown below:

 

Source: company’s reports  *assuming same dividend rate for the year

During the quarter, the company repurchased $150 million, or about 1.5 million shares, of PPG stock, and average diluted shares outstanding were reduced by about 2% versus the prior year.

The company has approximately $770 million remaining under its current share repurchase authorization. PPG reiterated its commitment to deploy $2.0 billion to $2.5 billion of cash, in years 2015 and 2016 combined, on acquisitions and share repurchases.

PPG’s Fair Valuation

Since the beginning of the year, PPG’s stock is up 9.1% while the S&P 500 Index has increased 3.3%, and the Nasdaq Composite Index has lost 0.9%.

Moreover, since the beginning of 2012, PPG’s stock has gained 158.1%, in this period, the S&P 500 Index has increased 67.9%, and the Nasdaq Composite Index has risen 90.5%.

PPG’s valuation is good (not great):

– Trailing price-to-earnings ratio is at 20.4

– Forward price-to-earnings ratio is at 15.4

– The price-to-sales ratio is at 1.9

– The price-to-cash-flow ratio is at 14.9

– The price-to-free-cash-flow is at 19.7

– The Enterprise Value/EBITDA ratio is low at 12.1

– The PEG ratio is at 1.7.

All this ads up to a high quality business with favorable growth prospects trading around fair value (if not somewhat below).