Sherwin-Williams: Not cheap but a bargain

SHW: A Bargain in Disguise

Excerpt:

Sherwin-Williams (SHW) is almost never cheap, at least compared to the benchmark legendary investor Peter Lynch gave us (a P/E ratio of 15 or less), but with a P/E of 22.9, it’s well below its five-year average of 26.9.

That’s a solid entry point for the paint maker, which is set to close its $11.3-billion merger with Valspar (VAL) in the first quarter. That will make it the world’s biggest paint company, with revenue of $15.6 billion.

It’s a big buy for Sherwin, whose market cap is $25.0 billion, but VAL will start chipping in to EPS right away (it earned $4.35 a share in the last 12 months), and Sherwin expects to wring $280 million in savings out of the combined firm in the first two years, rising to $320 million a year thereafter.

Sherwin should also cash in on US construction spending, which jumped 3.4% in October, and Donald Trump’s infrastructure plans; the new firm will get about 75% of its revenue from North America.And don’t worry, none of this should drag on Sherwin’s soaring dividend, which has more than doubled in the last five years: SHW’s payout ratio (or the percentage of earnings paid out as dividends) is just 26.7%

Comments:

• The article is from 12/2016 so is a bit dated.
• They've closed the Valspar deal (a Minneapolis company)
• The dividend is low at .88%
• The payout ratio is also low at 17.79%. 
• Kathee likes their paint - used for our bathroom remodel last year and our den remodel this year
• Pricey at $ 415, but I bought a couple of shares
• I've loved their logo since I was a kid