Sherwin-Williams (NYSE:SHW) is one of the world’s largest paint and coatings manufacturers and distributors. The company has more than 4,000 stores across North America and employs over 60,000 people worldwide.
Sherwin-Williams offer a wide range of products, including interior and exterior paints; stains; sealers; primers; wallpaper and wall covering supplies; drywall tools; window treatments such as blinds and shades; adhesives; caulks, fillers, and patching compounds—everything needed to complete any project to regular consumer and professional customers.
In addition to paint products, Sherwin-Williams also offers wallpaper collections with an array of patterns to choose from and speciality cleaners and painting supplies such as brushes and rollers. As part of its commitment to sustainability initiatives, the company uses recycled materials during production processes whenever possible.
Sherwin-Williams is focused on providing its customers with a wide range of high-quality products and services, with a strong emphasis on innovation and customer service. The company invests heavily in its R&D efforts, which has allowed it to create innovative products that meet the market’s changing needs. It has a team of scientists and engineers who are constantly working on new technologies and formulations, which has helped the company develop a wide range of coatings and related products that are effective, durable, and sustainable.
Business Model
Sherwin-Williams operates through three main business segments: The Americas Group, Performance Coatings Group, and Consumer Brand Group.
The Americas Group segment is the company’s largest segment and includes operations in North and South America, accounting for 56% of Sherwin William’s 2021 total sales. This segment provides a wide range of products and services to professional, industrial, commercial, and retail customers through exclusive outlets for Sherwin-Williams® branded paints, stains, supplies, equipment and floor covering in the United States, Canada and the Caribbean. The Group also manufactures and sells architectural paints, industrial coatings and related products in Latin America through company stores, dedicated dealers and selected retailers.
The Performance Coatings Group is the company’s second largest and fastest-growing segment accounting for 30% of 2021 total sales. The Performance Coatings Group segment provides a wide range of products and services to customers in the automotive, aerospace, and industrial markets. This includes automotive finishes, Aerospace coatings, and protective and marine coatings. The Performance Coatings Group also consists of the company’s global colour, packaging, and formulation technologies operations.
The Consumer Brand Group is the company’s smallest segment accounting for 14% of 2021 total sales. The Consumer Brands Group segment provide a wide range of products and services to consumers, including paints, stains, other coatings, wall coverings, flooring, and services. The Group provides products and services to consumer in more than 100 countries. In 2021, revenue in this segment declined 10.9% to $2.72 million due to reduced demand for DIY products following the easing of COVID-19 lockdowns, consumers returning to work, and fewer home “nesting” projected.
Growth Prospects
The company has a long history of growth and success, and it is well-positioned for continued success in the future. One of the key growth drivers for the company is the increasing demand for paints and coatings in emerging markets, particularly in Asia and Latin America. As these regions continue to urbanise and develop, the need for high-quality paints and coatings is expected to rise. Sherwin-Williams’s strong distribution network could be a key driver that enables Sherwin-Williams to reach customers in a wide range of markets. Another potential growth driver for Sherwin Williams is the increasing focus on sustainability and environmental protection. As consumers and businesses become more environmentally conscious, there is a growing demand for eco-friendly and sustainable products. Sherwin-Williams has been at the forefront of this trend with a range of sustainable products designed to minimise their environmental impact. The company’s commitment to sustainability has helped it to differentiate itself from competitors and gain a loyal customer base. It is likely to continue to be a key growth driver in the future
Dividend Profile
Sherwin-Williams has an impressive track record of growing its dividend payments for 44 consecutive years. The company’s commitment to rewarding investors has held steady even in times of economic uncertainty and during recessions.
Sherwin-Williams takes great pride in their dividend history as part of their commitment to long-term shareholders. They have not only steadily grown their dividend over time, but also look for ways to increase shareholder value beyond just issuing dividends such as through share repurchases and other strategic investments. Currently, Sherwin Williams annual dividend stands at $2.4 per share, with a current yield of 1.01%, and a payout ratio of 31.5%.
Business Risks
Despite its strong market position and solid financial performance, Sherwin-Williams does face some business risks.
- Economic downturns: Sherwin-Williams’ products are used in various industries, from construction and automotive to marine and aerospace. As a result, the company is exposed to economic downturns in these industries, which can impact its sales and profitability
- Competitive pressures: Sherwin-Williams faces intense competition from other manufacturers and distributors of coatings and related products. The company must continuously innovate and improve its products and services to stay ahead of the competition
- Regulation: The coatings industry is heavily regulated, and Sherwin-Williams must comply with a range of laws and regulations related to the manufacturing and use of its products. Failure to comply with these regulations could result in fines, legal action, and reputational damage
- Supply chain disruptions: Sherwin-Williams relies on a global supply chain to manufacture and distribute its products. Disruptions in this supply chain, such as natural disasters or geopolitical tensions, could impact the company’s ability to deliver its products to customers
Closing Thoughts
Sherwin-Williams is a well-established company with a proven track record, a strong branding, and dominant position in the paints and coatings industry, which bodes well for its future profitability and growth. Its strong emphasis on innovation and customer service, coupled with its solid financial performance, make it a compelling investment option. In addition, the company also has a history of consistently increasing its dividends, and it has a healthy dividend payout ratio, indicating that it can continue paying and growing its dividends in the future. However, investors should be aware of the company’s industry’s potential business risks and the cyclical nature.