Company Description: PPG is a leading manufacturer of coatings and resins, flat and fiber glass, and industrial and specialty chemicals.
Fair Value: I consider four calculations of fair value, see page 2 of the linked PDF for a detailed description:
- Avg. High Yield Price
- 20-Year DCF Price
- Avg. P/E Price
- Graham Number
Dividend Analytical Data: In this section I consider five factors, see page 2 of the linked PDF for a detailed description:
- Rolling 4-yr Div. > 15%
- Dividend Growth Rate
- Years of Div. Growth
- 1-Yr. > 5-Yr Growth
- Payout 15% of avg.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:
- NPV MMA Diff.
- Years to >MMA.
Other: PPG is both an S&P 500 Dividend Aristocrat and a member of The Broad Dividend Achievers™ Index. The company has a diversified business mix and large market shares in key products. However, commodity chemicals business and auto supply business are highly cyclical in nature. The SigmaKalon purchase expanded PPG's coatings business, while the planned sale of the auto glass businesses would reduce its exposure to the domestic auto market.
Conclusion: PPG earned a Star in the Fair Value section, earned one Star in the Dividend Analytical Data section and lost one Star in the Dividend Income vs. MMA section for a net total of one Star. This quantitatively rates PPG as a 1 Star-Very Weak stock.
Using my D4L-PreScreen.xls model, I determined the share price would have to drop to $39.62, or its dividend growth rate would have to increase to 7.8%, before PPG obtained the $3,000 NPV MMA Diff. I like to see. I don't see either happening in the near-term, so PPG won't be getting an invitation to join my portfolio.
Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Full Disclosure: At the time of this writing, I do not own shares of PPG (0.0% of my Income Portfolio).
What are your thoughts on PPG?
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