Seeking to reassure and reward investors, both The Sherwin-Williams Co. and PPG Industries announced plans Friday (Oct. 21) for major stock buybacks along with their regular quarterly dividends.
On the eve of releasing its third-quarter financials, and following a difficult second quarter, Sherwin-Williams’ board authorized the repurchase of up 20 million shares of common stock—an amount that, in full, would be close to one-fifth of its common stock outstanding.
|The Global Finishes Group helped Sherwin-Williams in the second quarter. The Q3 report is due Tuesday.|
The world’s fourth-largest paint and coatings company also declared a regular quarterly dividend of 36.5 cents per common share, payable Dec. 2 to shareholders of record on Nov. 18.
Meanwhile, fresh off a strong third quarter, PPG said it would buy back up to 10 million shares of its stock and declared a dividend of 57 cents per share, payable Dec. 12 to shareholders of record Nov. 10.
Sherwin-Williams: Ups and Downs
Sherwin-Williams’ buyback authorization is its first since October 2007, when the board authorized the repurchase of up to 30 million shares. As of June 30, the company had 106.3 million shares outstanding and a remaining buyback authorization of 4.15 million shares. In the second quarter, it bought back 500,000 shares.
Despite strong sales in protective and marine coatings, the Cleveland-based company was hammered in the second quarter by raw materials costs. Quarterly profit and earnings both declined, and the company cut its full-year profit forecast.
The third-quarter report is due out Tuesday (Oct. 25).
Sherwin-Williams’ shares recently traded at $79.44, up 2.7%, but “the outlook for its retail paint business remains uncertain as consumer spending and the housing market’s recovery has been uneven,” Dow Jones Newswires reported this week.
Crain’s Cleveland noted that the company’s stock has fallen 7.7% this year.
Many companies have been expanding their stock repurchase plans in the wake of the market’s August crash and continuing volatility.
Like dividends and stock price increases, share buybacks allow a company to return wealth to shareholders. In a repurchase, a company buys back its shares from the marketplace, reducing the number of outstanding shares and thereby increasing the ownership stake of each investor.
Buybacks also improve a company’s price-earnings ratio, a key indicator of the company’s value.
Sherwin-Williams said its repurchases “will be made from time to time for general corporate purposes.”
“We’re regular buyers of our shares and have been for many years,” said company spokesman Mike Conway. The latest repurchase announcement is in keeping with the practice, he said.
PPG: ‘Reward Our Shareholders’
PPG’s announcements came a day after it released a strong third-quarter report that showed an 11 percent increase in net sales and the fifth consecutive quarter in which it bested its prior quarterly earnings record.
The dividend declared Friday was PPG’s 453rd consecutive dividend payment and its 40th consecutive year of increasing its annual dividend payment. PPG, the world’s second-largest paint and coatings company, has paid uninterrupted annual dividends since 1899.
|Stock repurchases are “are an excellent means to reward our shareholders,” said PPG CFO David B. Navikas.|
PPG last authorized a repurchase program, for 10 million shares, in October 2010. About 1.7 million shares remained as of Sept. 30, the company said. PPG said the new repurchases would occur “from time to time without prior notice.”
“In the three years since PPG completed the SigmaKalon acquisition in 2008, our average annual cash from operations grew by nearly 30 percent versus the prior five-year average, providing us with additional cash to grow earnings and return to shareholders,” said David B. Navikas, PPG senior vice president, finance and chief financial officer.
“Since the beginning of 2010, we have used a portion of our expanded cash position to repurchase about 16 million shares of stock, reducing PPG’s outstanding share count by nearly 10 percent, as we believe such repurchases are an excellent means to reward our shareholders.”