RPM International Inc.: Assessing Dividend Sustainability Amid Sector Growth and Strategic Shifts

RPM International Inc. (NYSE: RPM), a global leader in coatings and building products, has long been celebrated for its unwavering commitment to shareholder returns. With a 51-year streak of consecutive dividend increases, the company's payout sustainability is a focal point for income-oriented investors. However, as macroeconomic headwinds and strategic shifts reshape its financial landscape, a closer examination of RPM's dividend health-against the backdrop of its sector positioning and operational performance-is warranted.

Dividend Sustainability: Balancing Payouts and Financial Resilience

RPM's current dividend payout ratio stands at 37.8%, a marked improvement from its trailing 12-month ratio of 45.16%, according to MarketBeat. This decline reflects stronger earnings momentum, with fiscal 2025 adjusted EPS reaching $5.35 on $7.37 billion in sales, as discussed on the Q1 FY2026 earnings call. Looking ahead, analysts project the ratio to dip further to 29.53% in 2026, according to Seeking Alpha, suggesting ample room for future increases while maintaining a conservative approach to capital allocation.

Free cash flow (FCF), a critical metric for dividend sustainability, tells a more nuanced story. While RPM generated $538.26 million in FY2025 FCF, this marked a 40.76% decline from FY2024's $908.34 million, primarily due to $595.77 million in acquisition-related outflows, according to Monexa. However, the company's operating cash flow of $768.19 million in 2025, as Monexa notes, underscores its ability to generate liquidity, even amid strategic investments. RPM's MAP 2025 initiative-focused on inventory optimization and cost discipline-has further bolstered cash flow resilience, with Q3 2025 operating cash flow hitting a record $91.5 million, as the Q3 FY2025 earnings call showed despite a 3% sales decline.

Debt management remains a key concern. As of Q3 2025, RPM's debt-to-equity ratio rose to 1.69, driven by $4.89 billion in long-term debt, according to MacroTrends. While this exceeds the industry average of 1.03, according to MacroTrends, the company has made strides in reducing net debt by $453.1 million over the past 12 months, as its Q3 earnings transcript shows. With a projected FCF-to-debt ratio of ~11.7% in 2025, Monexa projects RPM appears well-positioned to continue deleveraging while sustaining its dividend.

Sector Positioning: Navigating Growth and Competition

The coatings and building products industry is poised for robust expansion, with the global market projected to grow at a 6.2% CAGR through 2029, reaching $315.08 billion, according to the Business Research Company. RPM's focus on high-margin segments-such as turnkey roofing systems and protective coatings-aligns with this trajectory, particularly in emerging markets where infrastructure demand is surging. The Asia-Pacific region, which accounts for 42.2% of global coatings revenue, represents a key growth avenue for RPM's repair-and-maintenance solutions, according to the report.

Competitive advantages are further amplified by RPM's systems-selling model, which integrates technical expertise with product offerings to secure long-term customer relationships; the Q1 FY2026 call highlighted this approach. Strategic acquisitions, such as those in the waterborne coatings and bio-based materials spaces, also position RPM to capitalize on sustainability trends. Notably, waterborne coatings now dominate 44.4% of the U.S. market, per the report, a segment where RPM's innovation pipeline is gaining traction.

Long-Term Dividend Strategy: A Track Record of Prudence

RPM's dividend policy is anchored in its 51-year history of annual increases-a feat that underscores its commitment to shareholder value. The company's current yield of 1.74%, according to StockInvest, may appear modest compared to high-growth peers, but its payout ratio's projected decline to 29.53% in 2026, as Seeking Alpha projects, suggests a durable foundation for future hikes. This aligns with RPM's MAP 2025 roadmap, which aims to drive margin expansion through operational efficiency and pricing power.

Investors should also consider RPM's capital allocation priorities. While acquisitions have temporarily strained FCF, the company's disciplined approach to debt paydown and its focus on organic growth in high-margin markets signal a balanced strategy. As noted in its 10-Q filing, RPM expects to maintain mid-single-digit sales growth and high-single-digit EBIT growth in 2026, further supporting its dividend trajectory.

Conclusion: A Dividend King in a Dynamic Sector

RPM International's dividend sustainability is underpinned by a combination of prudent financial management, sector tailwinds, and strategic agility. While near-term FCF volatility and elevated debt levels warrant caution, the company's strong operating cash flow, improving payout ratios, and alignment with high-growth industry segments position it as a compelling long-term holding. For investors seeking a Dividend King with a proven ability to adapt to macroeconomic cycles and industry shifts, RPM offers a compelling blend of income security and growth potential.