RPM International: A Dividend Dynasty Built to Last

RPM International (NYSE: RPM) has quietly carved out a legendary status in the investing world: it's one of just 42 U.S. companies with a 51-year dividend growth streak, earning it the title of a “Dividend King.” This streak, spanning over half a century, underscores RPM's resilience and disciplined financial management. But what makes its dividend sustainable, and does it have room to grow further? Let's dive into the details.

The Dividend Machine: A 51-Year Track Record

RPM's dividend history is a study in consistency. Since 1974, it has increased its annual dividend every year, weathering recessions, market crashes, and industry headwinds. In 2024, it raised its quarterly dividend by 11% to $0.51 per share, marking its 51st consecutive year of hikes. This places it in rarefied air—only 42 U.S. firms have achieved such a streak.

What fuels this longevity? Three key pillars:
1. Diverse, Recession-Resistant Products: Brands like Rust-Oleum, DAP, and Varathane cater to construction, DIY, and industrial markets, which see steady demand even in downturns.
2. Strong Cash Flow: In 2024, RPM generated $1.12 billion in operating cash flow, a record high, funding both dividends and strategic moves like its recent acquisition of The Pink Stuff (a leading cleaning brand).
3. Prudent Financial Management: The payout ratio—dividends as a percentage of earnings—remains a conservative 38.75%, far below the Basic Materials sector average of 55.1%. This leaves ample room to navigate economic shocks without cutting the dividend.

2025 Performance: Headwinds, but Still Steady

RPM's fiscal 2025 third-quarter results highlighted challenges but also resilience. Sales dipped 3% to $1.48 billion due to adverse weather and foreign currency headwinds, while net income fell 15% to $52 million. However, cash flow remained robust at $91.5 million, and RPM reduced debt by $90 million year-over-year.

The company also announced an acquisition of The Pink Stuff, a move to expand its consumer portfolio. This diversification aligns with RPM's strategy to capitalize on repair-and-maintenance demand—a stable sector even in economic soft patches.

Is the Dividend Safe?

• Payout Ratio: At 38.75%, RPM's dividend is comfortably covered by earnings.
• Cash Reserves: Liquidity stands at $1.21 billion, ensuring flexibility for dividends and buybacks.
• Industry Position: As a leader in specialty chemicals, RPM benefits from pricing power and recurring demand.

Even in Q3's weak quarter, RPM reaffirmed its commitment to shareholder returns, paying $242.6 million in dividends and buybacks year-to-date.

Growth Potential: Can RPM Keep Growing?

RPM's dividend yield of 1.95% may seem modest, but its historical dividend growth rates are compelling:
- 10.23% annualized over the past year
- 7.54% over three years
- 6.85% over a decade

While growth has moderated over time, RPM's focus on operational efficiency (via its “MAP 2025” initiative) and strategic acquisitions like The Pink Stuff could reignite momentum. The company also benefits from its global footprint—operating in over 150 countries—though it's mindful of currency risks.

Risks to Consider

• Economic Sensitivity: A prolonged recession could dampen construction and industrial demand.
• Currency Fluctuations: Foreign sales (e.g., in Europe and Latin America) face headwinds from a strong U.S. dollar.
• Commodity Costs: Rising raw material prices, exacerbated by tariffs, could squeeze margins.

Investment Thesis

RPM is a core holding for income investors seeking a blend of safety and growth. Its dividend is rock-solid, backed by decades of discipline and a conservative payout ratio. While the stock's yield isn't sky-high, the compounding power of 50+ years of dividend growth is unmatched.

For growth investors, RPM's valuation—currently trading at 16x forward earnings—appears reasonable given its stability. The acquisition of The Pink Stuff also hints at strategic moves to drive top-line growth.

Final Take

RPM International isn't a high-flying tech stock, but its dividend dynasty is a testament to time-tested excellence. With a Safe Dividend Safety Score, diversified revenue streams, and a culture of shareholder returns, RPM offers a reliable income stream for the long haul. For conservative investors, this is a “set it and forget it” name.

Actionable Advice:
- Buy: For a stable income component in your portfolio.
- Hold: If already invested, unless macroeconomic conditions deteriorate sharply.
- Avoid: If you're seeking high-yield or rapid dividend growth—RPM's 1.95% yield and moderate growth rate may disappoint in a high-interest-rate environment.

In a world of volatility, RPM's 51-year dividend streak is a rare beacon of consistency.