Why RPM International Inc. is a Dividend Gem Waiting to Shine

In a market increasingly captivated by high-flying tech stocks and AI-driven innovations, one sector remains quietly resilient: industrial coatings and construction materials. Among its hidden gems is RPM International Inc. (NYSE: RPM), a dividend stalwart that has gone unnoticed by many investors despite its 53-year streak of consecutive dividend increases. With a robust financial foundation, a disciplined capital allocation strategy, and a portfolio of niche-market leaders, RPM offers a compelling mix of income stability and growth potential.

Dividend Strength: A 53-Year Track Record of Reliability

RPM’s dividend history is nothing short of extraordinary. The company has increased its payout every year since 1970, making it a member of the S.A.F.E. 25 list—a group of companies with solid returns, accelerating dividends, flawless payment histories, and enduring track records. As of April 2025, RPM’s annualized dividend stands at $2.04 per share, yielding 1.91% at current prices.

What makes this dividend sustainable? A payout ratio of 38.75% (as of April 2025), well below the danger zone of 60%+, paired with a free cash flow payout ratio of 45.20%—a marked improvement from its 3-year average of 97.89%. This leaves ample room for future hikes while retaining earnings for reinvestment.

Financial Resilience: Navigating Challenges with Margin Discipline

Despite recent headwinds, RPM’s financials remain a pillar of strength. In its fiscal second quarter of 2025 (ended November 30, 2024), the company reported:
- Record net income of $183.2 million, a 25.9% year-over-year jump.
- Adjusted EBIT of $255.1 million, up 7.7% on operational efficiencies from its MAP 2025 cost-saving initiatives.
- Operating cash flow of $279.4 million, fueling $159.5 million in shareholder returns (dividends and buybacks).

Even in its recent third-quarter miss (Q3 2025), RPM generated $91.5 million in operating cash flow, its second-highest quarterly result on record. CEO Frank Sullivan emphasized: “We remain focused on executing our strategic initiatives, including MAP 2025, to drive margin expansion and shareholder value.”

Valuation: A Stock Undervalued by Near-Term Noise

RPM’s stock price has dipped recently, nearing its 52-week low of $99.80 following a Q3 earnings miss. However, this volatility obscures its undervalued status. Analysts estimate a fair value of $174.69, implying a 33.5% upside from its April 2025 price of $116.22. The stock’s PEG ratio of 0.87 further suggests it trades below its growth potential, with a consensus price target of $124.10.

While its P/E ratio of 20.32 exceeds the chemicals industry average of 15.6x, RPM’s superior profitability—a 24% return on equity (ROE) versus an industry average of 9..9%—justifies this premium. The company’s focus on high-margin niches (e.g., roofing systems, industrial coatings) and geographic diversification (growth in Asia/Pacific and Africa/Middle East) positions it to outperform peers in a challenging macro environment.

Risks to Consider

• Economic Sensitivity: RPM’s end markets—construction, maintenance, and industrial—are tied to economic cycles. A prolonged downturn could pressure sales.
• Input Costs: Raw material inflation (projected at mid-single digits in 2026) and currency headwinds (e.g., Euro weakness) remain risks.
• Execution Risks: The MAP 2025 initiative’s $100 million annual savings target by 2026 hinges on operational discipline.

Conclusion: A Dividend Stock with Hidden Upside

RPM International is a sleeping giant in the dividend space. Its 53-year dividend growth streak, sustainable payout ratios, and operational resilience make it a standout in an era of market volatility. While short-term headwinds like currency impacts and weak residential demand have dented near-term performance, RPM’s fundamentals—strong cash flow, niche-market dominance, and cost discipline—suggest it’s undervalued and poised for recovery.

Investors seeking stability and growth should note:
- Dividend Safety: A payout ratio of 38.75% and free cash flow coverage of 45.2% ensure the dividend is secure.
- Valuation Attractiveness: A fair value estimate of $174.69 and analyst consensus of $124.10 imply significant upside.
- Long-Term Growth: The MAP 2025 program and strategic acquisitions (e.g., the $12 billion Pink Stuff brand) position RPM to capitalize on infrastructure spending and sustainability trends.

In a market obsessed with the next big thing, RPM’s steady-as-she-goes approach offers a refreshing alternative. For income-focused investors willing to look beyond the headlines, RPM International is a dividend stock worth buying now.

Final Note: Always conduct your own research or consult a financial advisor before making investment decisions.