Packaging Corporation of America (PKG) 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. The first quarter 2013 dividend is payable on Apr 15 to shareholders of record as of Mar 15.
Based on the closing price of $39.17 as of Jan 14, the proposed dividend affirms a yield of 3.2%. A steady dividend payout facilitates the long-term strategy of Packaging Corporation 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 hiked its dividend in first quarter 2012, when it raised the quarterly dividend payout from 20 cents to 25 cents per share or from 80 cents to $1.00 on an annualized basis. Prior to that, Packaging Corporation raised its quarterly dividend in first quarter 2011 from 15 cents to 20 cents per share, which equated to an annualized increase from 60 cents to 80 cents.
Headquartered in Lake Forest, Illinois, Packaging Corporation is one of the leading containerboard and corrugated products manufacturer in the U.S. Since its inception in 1867, the company has expanded its operations across the length and breadth of the country and currently operates four paper mills and 71 corrugated product plants in 26 states.
The company produces diverse corrugated packaging products, including conventional shipping containers that protect and transport manufactured goods; multi-color boxes and displays that help to merchandise the packaged product in retail locations; and meat boxes and wax-coated boxes for the agricultural industry.
Packaging Corporation has recently raised the price of its domestic containerboard and is likely to increase the price for corrugated products as well. Considering this price rise, management anticipates that earnings for the fourth quarter of 2012 will be roughly 61 cents per share. The current Zacks Consensus Estimate for the upcoming quarter is pegged at 62 cents.
We maintain our Neutral recommendation on Packaging Corporation, which presently has a Zacks Rank #2 (Buy). We also have a Neutral recommendation and a Zacks Rank #3 (Hold) for Bemis Company, Inc. (BMS), one of the competitors of Packaging Corporation.
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