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Packaging Corp (PKG) Announces a 25% Hike in Dividend Payout

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Packaging Corporation of America’s PKG board announced its plan to hike quarterly cash dividend by 25%. The move reflects the company’s operational and financial strength, disciplined capital allocation approach and focus on generating shareholders’ value.  

Packaging Corporation will now pay the new quarterly cash dividend of $1.25 per share, bringing the annualized dividend rate to $5.00 per share. The dividend will be paid out on July 15 to shareholders of record as of Jun 15, 2022. The raised dividend takes the current dividend yield from 2.65% to 3.31%, higher than the industry’s 2.32%. The company has a payout ratio of 38.7% compared with the industry’s 33.3%.
Over the five years, the company has increased its dividend twice. Packaging Corporation has a five-year average dividend yield of 2.9%, a five-year dividend growth rate of 10.9% and a five-year average payout ratio of 42.2%. The company outscores its peer, Sealed Air Corporation SEE, which has a five-year average dividend yield of 1.5%, a five-year dividend growth rate of 4.4% and a five-year average payout ratio of 22.9%. Sealed Air has increased its dividend once in the past five years.

In the first quarter of 2022, Packaging Corporation paid out $93.6 million as dividends to shareholders. The company’s board of directors approved a $1-billion repurchase authorization in January 2022. PKG is focused on lowering its debt levels. It completed debt refinancing in October 2021, which extended the company’s overall debt maturity from 8.5 years to 16.3 years and lowered its overall interest rate from 3.9% to 3.5%. The company’s total debt to total capital ratio was at 0.40 as of Mar 31, 2022, lower than the industry’s 0.63. The company’s times-interest-earned ratio has been increasing in the past few years and is currently at 9.3 compared with the industry’s 7.5.

Last month, Packaging Corporation reported first-quarter 2022 adjusted earnings per share (EPS) of $2.72, surpassing the Zacks Consensus Estimate of $2.53. The bottom-line figure increased 54% year over year. PKG has a trailing four-quarter earnings surprise of 19.6%, on average.

Demand in the Packaging segment, which accounts for 91% of the company’s revenues, continues to be strong. Packaging products are essential for distributing food, beverage and pharmaceutical products. Hence, the Packaging segment continues to benefit from the elevated demand for meat, fruit and vegetables, processed food, beverages, medicine and other consumer products.

Demand for containerboard and corrugated products remains strong across most of the company’s end markets. Apart from this, Packaging Corp will continue to benefit from the e-commerce boom that has increased demand for boxes.

Packaging Corporation projects EPS to be around $2.83 in second-quarter 2022. The guidance indicates year-over-year growth of 30%. Its Packaging segment will benefit from the ongoing strength in demand. It will continue to implement previously-announced price hikes across both segments, which will help in negating the impact of cost inflation.

Price Performance

Packaging Corporation’s shares have moved up 1.1% in the past year compared with the industry’s decline of 4.2%.

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Zacks Rank & Other Stocks to Consider

Packaging Corporation currently flaunts a Zacks Rank #1 (Strong Buy).

Some other top-ranked stocks in the Industrial Products sector are Graphic Packaging Holding Company GPK and Myers Industries MYE, each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Graphic Packaging has an estimated earnings growth rate of 86.8% for the current year. In the past 60 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 7.6%.

Graphic Packaging pulled off a trailing four-quarter earnings surprise of 7.2%, on average. The company’s shares have appreciated 14.8% in a year.

Myers Industries has an expected earnings growth rate of 67% for 2022. The Zacks Consensus Estimate for the current year’s earnings has moved up 27% in the past 60 days.

MYE has a trailing four-quarter earnings surprise of 20.1%, on average. Myers Industries’ shares have gained 13% in the past year.

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Sealed Air Corporation (SEE) : Free Stock Analysis Report
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Myers Industries, Inc. (MYE) : Free Stock Analysis Report
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