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The Valspar Corporation (VAL - Analyst Report), the sixth largest paint and coatings manufacturer globally, has beefed up its quarterly dividend by 15% to 23 cents per share from 20 cents. This raises the company’s annual dividend to 92 cents per share from the prior payout of 80 cents, representing a 1.5% yield.

The revised quarterly dividend is payable on December 28, 2012, to shareholders of record as of December 17, 2012. This represents the Minneapolis-based company’s 35th straight year of dividend increase.

Separately, the company’s board has approved the repurchase of 15 million shares. The new repurchase authorization, which is effective immediately, replaces the prior authorization of October 2010 and has no expiry date. The company bought back 12.4 million shares for $514 million through October 26, 2012, under the earlier repurchase authorization. It had roughly 90 million shares outstanding as of December 4.

Valspar has a strong pipeline of new products and significant opportunities for share gains in both its Paint and Coatings segments. It continues to see strength in its coatings business as evidenced by higher volumes, new business wins and market share gains. While the company expects the overall demand environment to be uneven moving ahead, it envisions a double-digit growth in earnings in fiscal 2013.

Valspar expects sales to benefit from the diverse mix of businesses and growth in the fast growing coatings markets in Asia and Latin America. The company is managing its costs well and maintaining a cost structure that is appropriate for the current external environment.

However, Valspar’s Paint segment performed weakly in the most recent quarter. The segment’s growth has been hurt by a weak residential housing market in Australia, which may continue to affect sales moving ahead. The company also remains exposed to cost pressures associated with raw material inflation.

Valspar, which competes with Sherwin Williams Company (SHW - Analyst Report) and PPG Industries Inc. (PPG - Analyst Report), currently retains a short-term Zacks #2 Rank (Buy). We have a long-term Neutral recommendation on the stock.

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