Packaging Corporation of America (PKG), the fourth largest containerboard and corrugated packaging manufacturer in the U.S., recently announced a 37.5% year-over-year hike in its annual dividend payout to $2.20 per share. The first quarter 2015 cash dividend of 55 cents is payable on Apr 15 to shareholders of record as of Mar 13.
Based on the closing price of $82.71 on Feb 26, 2015, the proposed dividend affirms a yield of 2.7%. A steady dividend payout is part of the long-term strategy of Packaging Corp. to provide attractive risk-adjusted returns to its stockholders. In addition, decent dividend increases at periodic intervals have been one of the company’s most attractive features.
The company had earlier raised the quarterly dividend payout from 31.3 cents to 40 cents per share in Jun 2013 and from 25 cents to 31.3 cents per share in Mar 2013. Prior to that, Packaging Corporation raised its quarterly dividend in Mar 2012 from 20 cents to 25 cents per share.
The recent dividend hike follows strong fourth quarter and full year 2014 results, with Packaging Corp. reporting record net sales of $5.9 billion for the year. The superior performance was attributable to strong corrugated products demand, productive mill operations, and a successful rebuild and start-up of the D3 machine.
The increase in dividend payout also signifies the inherent financial strength of the company, driven by a healthy execution of operating plans. In addition, Packaging Corp. has a healthy liquidity position with a cash balance of $124.9 million as of Dec 31, 2014.
Packaging Corp. manufactures a diversified range of corrugated products such as shipping containers, point-of-sale graphics packaging, point-of-purchase displays and other specialized packaging. The company operates 99 corrugated products manufacturing plants and 8 paper mills across the country.
Packaging Corp. currently has a Zacks Rank #3 (Hold). Other players in the industry worth mentioning include Berry Plastics Group, Inc. (BERY) carrying a Zacks Rank #1 (Strong Buy) along with Bemis Company, Inc. (BMS) and Sealed Air Corp. (SEE), both carrying a Zacks Rank #2 (Buy).
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