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The Recently Recommended Monthly Stock Special
Recently Recommended

The recently recommended company is *Masco Corp. (MAS)

Comparison MAS (recently recommended stock of the month) vs SP500 (by Vanguard SP500 Index Fund) in the last 10 years.

Company Information:

Founded in 1929 and headquartered in Livonia, Michigan, Masco Corporation (MAS) designs, manufactures, and distributes home improvement and building products worldwide, and offers its products in four different segments: Plumbing, Decorative Architectural Products, Cabinetry and Windows and other Specialty Products. The company offers its products through home center retailers, online retailers, mass merchandisers, hardware stores, homebuilders, distributors, and other outlets to consumers and contractors, as well as directly to consumers. The products are also sold to both contractors and through national retail chains like Home Depot (HD) and Lowe's (LOW).


Its current total market capitalization of $9.7 billion makes MAS a mid-capitalization stock (a mid-cap stock has a market capitalization value ranging from $2 billion to $10 billion) and its long history of consistent earnings growth and dividend payments makes it a solid company. It is considered a well-diversified business with a durable competitive advantage over its rivals, which also enjoys a solid corporate culture. According to Yahoo! Finance, consensus estimates call for the company to earn about $2.42 per share this year, up from $1.94 per share last year, and to go to about $2.75 per share next year. Masco Corporation has paid dividends to investors since 1944 and during the past five years, it has increased its dividends at an average rate of 7.7%. Its quarterly payment of $0.12 per share currently provides a yield of 1.39%.


The value of dividends reinvestment: A hypothetical investment in Masco Corporation has grown cumulatively (including dividends reinvested) 2,950.87% during the past forty years. The same investment has grown only 1,331.54% in the same period of time, excluding dividends. The stock exhibits a healthy Dividend Payout Ratio (DPR is the proportion of earnings paid out as dividends to shareholders) of 21.2%, which means the company is paying out 21.2% of all its net income in dividends and is retaining a large percentage of earnings to reinvest or grow the business. Its average DPR during the past five years is 25%. Its current Price to Earnings ratio (P/E --a measure of valuation) of 15.8 is 15.0% below the S&P 500® index, its Price to Sales ratio of 1.2 is 40.0% below the index, and its Price to Cash Flow of 10.4 is 18.3% below the index. According to Morningstar, the stock is trading 29% below its Fair Value Estimate, making it attractive for investors with a long-term investment horizon.


Technically (from the chart’s perspective) MAS also looks attractive, trading 31.8% below its 52 weeks high, while it is forming a price consolidation pattern between $46 and $27 approximately, in which $27 is acting as a strong technical support level. The index funds Vanguard Total Stock Market Index and Vanguard Mid Cap Index Institutional are major shareholders of MAS, holding 2.6% and 2.4% of its shares respectively. MASS’ main competitors are Fortune Brands Home & Security Inc. (FBHS) and Sherwin-Williams Co. (SHW).


Best and worst years during the past 40 years: Its best year was 2012, in which MAS returned, including dividends, 59.0%. On the flip side, its worst year was 2008, when the stock declined 48.5% including dividends. MAS’ dividend reinvestment plan charges no fees for cash investing, dividend reinvestment, safekeeping or automatic investment. With the stock being fundamental and technically attractive, this company is an appropriate holding for investors who wish to build a holding over the long term.


Disclosure: Mario Medina has no position in Masco Corp., and has no plans to initiate any position in the immediate future. The author wrote the article himself and it expresses his own opinions. The author has no business relationship with MAS and this article is not intended as a recommendation to invest as the information published does not take into account any subscriber's personal finances, goals or risk tolerance. Accordingly, you should be aware of all the risks associated with any financial investment and should consult an independent financial advisor for any personal investment advice.


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