AptarGroup Hikes Dividend (ATR) (GPK) (PKG) (UFPT)

AptarGroup, Inc. (ATR) has hiked its quarterly cash dividend by 14% to 25 cents per share or $1.00 on an annualized basis. Based on the closing price of $52.04 as of Jan 17, the proposed dividend affirms a yield of 1.92%.

The hiked dividend will be paid on February 20, 2013, to shareholders of record as of January 30, 2013. The company remains a consistent payer of dividends. In fiscal 2011 AptarGroup made a total dividend payout of $53.3 million and $43.8 million so far in the nine months of fiscal 2012.

Earlier in July 2011, the company had raised its dividend by 22% to the current payout of 22 cents per share. This was the largest raise AptarGroup has given its shareholders since a 33% dividend hike back in 2005.

Backed by a strong balance sheet, AptarGroup is in a position to return additional value to shareholders through an increased dividend, in addition to an active share repurchase program. Debt to capitalization ratio as of the end of the third quarter was at a manageable 22.4%.

AptarGroup reported third-quarter 2012 adjusted earnings of 64 cents per share compared with 74 cents in the year-ago quarter. Earnings were in line with the Zacks Consensus Estimate. Total revenues decreased 2% year over year to $589.6 million, but surpassed the Zacks Consensus Estimate of $586 million. Core sales increased 2% while changes in currency exchange rates had an 8% negative impact on sales in the quarter. Latin American and Asian markets remained strong while Europe continued to be weak.

AptarGroup announced a plan to transfer and consolidate production capacity in twelve facilities and shut down two facilities in Europe. The concerned facilities serve the beauty, personal care, food, beverage, and consumer health care markets. Total costs will be to the tune of €14 million (approximately $18 million), of which approximately €4 million (approximately $5 million using current exchange rates) relates to non-cash expenses. The plan is estimated to generate annual savings of approximately €9 million (approximately $12 million) beginning in late 2013.

The company expects earnings to remain in the range of 53 cents to 58 cents per share in the fourth quarter. This includes approximately 3 cents per share from the results of Aptar Stelmi.

AptarGroup has recently completed the acquisition of Stelmi Group, the manufacturer of elastomer primary packaging components for injectable drug delivery. With this purchase, AptarGroup enters the new arena of primary packaging components used in the injectable drug delivery. This acquisition endows AptarGroup with the opportunity to expand its product portfolio of pharmaceutical solutions in the Pharma segment. The integration is on track and the acquisition is expected to result in an accretion of between 12 cents and 16 cents per share beginning in the fourth quarter.

Furthermore, the optimization plan in Europe will position the company well for future growth. However, the ongoing weak economic conditions prevailing in Europe and foreign currency translation may affect results in the fourth quarter.

Crsytal Lake, Illinois-based AptarGroup is a leading global supplier of a broad range of innovative dispensing systems for the fragrance/cosmetic, personal care, pharmaceutical, household and food/beverage markets. AptarGroup retains a short-term Zacks Rank #4 (Sell).

Stocks in the same industry that are expected to perform strongly are Graphic Packaging Holding Company (GPK), which holds a Zacks Rank #1 (Strong Buy), Packaging Corp. of America (PKG) and UFP Technologies, Inc. (UFPT) which hold Zacks Rank #2 (Buy). Packaging Corporation recently declared a 25% year-over-year hike in its dividend payout to a quarterly payment of 31.25 cents per share or $1.25 on an annualized basis.