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Masco Corp. (MAS)

 

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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 three different segments: Plumbing, Decorative Architectural Products and other Specialty Products. The company offers them 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 company is currently ranked at 373 on the Fortune 500. Its current total market capitalization of $14.0 billion makes MAS a large capitalization stock (a large-cap stock has a market capitalization value of more than $10 billion) with a long history of consistent earnings growth and dividend payments.


It is considered a solid and well-diversified business with a wide economic moat and a sustainable competitive advantage over its rivals, which also enjoys an outstanding management and corporate culture. According to Yahoo! Finance, consensus estimates call for the company to earn about $3.02 per share this year, up from $2.25 per share last year, and to go to about $3.21 per share next year. Masco Corporation has paid dividends to investors since 1944, and has increased its payments for six consecutive years. During the past ten years has increased its dividends at an average rate of 7.6%, and its quarterly payment of $0.14 per share currently provides a yield of 1.02%.


The value of dividends reinvestment: A hypothetical investment in Masco has grown cumulatively (including dividends reinvested) 3,420.04% during the past forty years. The same investment has grown only 1,446.03% in the same period of time, excluding dividends. According to the data and calculations of the financial website dqydj.com (don’t quit your day job), a periodic monthly investment of $100 in MAS for the past 40 years would has grown to $486,680, including dividends reinvested. MAS still has room for significant dividend payments and dividend increases in the coming years, since the company's current Dividend Payout Ratio (DPR), which is its dividend payments as a percentage of its earnings, is just 19%.


Its current Price to Earnings ratio (P/E --a measure of valuation) of 18.74 is 27.3% below the US Market Index, and its Forward P/E ratio is 18.18. Its Price to Sales ratio (P/Sales) of 2.08 is 13.3% below the US Market index. And according to Morningstar, the stock is trading at a 3% discount, making it attractive for investors with a long-term investment horizon. Technically (from the chart’s perspective) MAS also looks attractive, trading 10.9% below its all-time high), while it is forming a long price consolidation pattern between $60 and $52 approximately, in which $52 is acting as a technical support level.


The index funds Vanguard Total Stock Market Index and Vanguard Mid Cap Index are major shareholders of MAS, holding 2.8% and 2.3% of its shares respectively. Masco’s main competitors are Fortune Brands Home & Security Inc. (FBHS) and Sherwin-Williams Co. (SHW). Masco’s 5-year Beta (a measure of the volatility, or systematic risk in comparison to the market as a whole as evidenced by the S&P 500® Index) is 1.51 so the stock is 51% more volatile than the Market.


Best and worst years during the past 40 years: Its best year was 2019, in which MAS returned, excluding dividends, 64.1%. On the flip side, its worst year was 2008, when the stock declined 48.5% excluding dividends. Masco’s 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 might be an appropriate holding for investors who wish to build a holding over the long term.


Disclosure: Mario Medina has no position in Masco Corporation 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. Past results and risks illustrated in the article are for reference and educational purpose only and do not guarantee future performance.