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PPG Industries (PPG) Could Be a Great Choice

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Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.

PPG Industries in Focus

Based in Pittsburgh, PPG Industries (PPG - Free Report) is in the Basic Materials sector, and so far this year, shares have seen a price change of -13.34%. The paint and coatings maker is currently shelling out a dividend of $0.65 per share, with a dividend yield of 2.01%. This compares to the Chemical - Specialty industry's yield of 0.92% and the S&P 500's yield of 1.59%.

Taking a look at the company's dividend growth, its current annualized dividend of $2.60 is up 2.4% from last year. PPG Industries has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 6.56%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, PPG Industries's payout ratio is 34%, which means it paid out 34% of its trailing 12-month EPS as dividend.

PPG is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2024 is $8.44 per share, with earnings expected to increase 10.04% from the year ago period.

Bottom Line

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. It's important to keep in mind that not all companies provide a quarterly payout.

Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, PPG is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of 3 (Hold).


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