Cramer's Chemical Romance With PPG
As promised, Cramer offered investors another high-yielding stock worth buying during Monday’s Mad Money, highlighting PPG Industries this time.
PPG , a chemicals company out of Pittsburgh, is expected to pay out a $2.14-a-share dividend, or 4.6%, in 2009. As long as that dividend is consistently reinvested for more shares of PPG, then buyers will double their money in 16 years, even if the stock itself goes nowhere.
Investors have a few reasons to feel confident in PPG’s payout. One is the fact that the company has raised its dividend every year since 1972. Another is that one such increase came just last month, a sign that PPG knew what its long-term prospects looked like and rewarded shareholders accordingly. Even worst-case scenario, should PPG make only half of its expected $5.31 a share in earnings next year – something that’s not likely to happen – this dividend is safe.
The last reason Cramer’s behind PPG and its dividend is that business here seems to be good. Some of the company’s different segments are growing in their respective markets, while others’ internal profit margins are trending wider, a win-win for management and investors alike. PPG is also sitting on $600 million in cash that it can use to, again, raise the dividend or buy back stock. And China’s just-announced stimulus plan should benefit a company that gets a third of its sales from Asia. There’s even exposure to Wal-Mart, a key consumer trade-down play in this tough economy, as PPG’s prescription eyeglass lenses are sold there.
A little catch-up for viewers who’ve missed Cramer’s strategy for this market: PPG qualifies as an “accidental high-yielder,” like Eaton or Nucor. It’s a stock that wouldn’t normally offer such a sizable yield, but after the market’s pushed down the share price, the dividend looks much more attractive. That’s why PPG, which is just three points from its 52-week low, works right now. The bigger the yield, the more attractive the stock. As investors pour in, that puts a floor under just how low a name like PPG can go. So there’s both a cushion for investors and the potential for returns in a market without many other opportunities.
Cramer’s take: PPG is a broken stock, not a broken company. He thinks this one’s a buy, buy, buy.
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