Packing Company of AmericaThe PKG board has announced its intention to increase the quarterly cash dividend by 25%. This decision reflects the company’s operational and financial strength, its disciplined approach to capital allocation and its focus on creating shareholder 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 on July 15 to shareholders of record on June 15, 2022. The increased dividend raises 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 to 33.3% in the industry.
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 outperforms its peers, Airline Sealed 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 in dividends to shareholders. The company’s board of directors approved a $1 billion buyout authorization in January 2022. PKG is focused on reducing its debt level. It completed the 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 0.40 as of March 31, 2022, below the industry ratio of 0.63. The ratio multiplied by the company’s interest earned has increased over the past few years and currently stands at 9.3 versus 7.5 in the industry.
Last month, Packaging Corporation reported adjusted earnings per share (EPS) for the first quarter of 2022 of $2.72, beating Zacks’ consensus estimate of $2.53. Revenue increased 54% year over year. PKG has a surprise on earnings for the last four quarters of 19.6% on average.
Demand in the packaging segment, which accounts for 91% of company revenue, continues to be strong. Packaging products are essential for the distribution of food, beverage and pharmaceutical products. Therefore, the packaging segment continues to benefit from the high demand for meat, fruits and vegetables, processed foods, beverages, medicines and other consumer products.
Demand for corrugated and corrugated products remains strong in most of the company’s end markets. Apart from this, Packaging Corp will continue to benefit from the e-commerce boom which has increased the demand for boxes.
Packaging Corporation forecasts EPS of approximately $2.83 in the second quarter of 2022. Forecasts point to 30% year-over-year growth. Its Packaging segment will benefit from continued strong demand. It will continue to implement previously announced price increases in both segments, which will help offset the impact of cost inflation.
Packaging Corporation shares are up 1.1% in the past year compared to the industry’s 4.2% decline.
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Zacks Ranking and Other Stocks to Consider
Packaging Corporation currently has a Zacks #1 (Strong Buy) rating.
Some other leading stocks in the industrials sector are Graphic packaging holding company GPK and Myers Industries MYE, each sporting a Zacks rank #1. You can see the full list of today’s Zacks #1 Rank stocks here.
Graphic Packaging has an estimated profit growth rate of 86.8% for the current year. Over the past 60 days, the Zacks consensus estimate for current-year earnings has been revised up 7.6%.
Graphic Packaging has realized an earnings surprise for the last four quarters of 7.2% on average. The company’s shares appreciated 14.8% in one year.
Myers Industries forecasts a 67% earnings growth rate for 2022. Zacks’ consensus estimate for current-year earnings is up 27% in the past 60 days.
MYE has a last four quarter earnings surprise of 20.1% on average. Shares of Myers Industries have gained 13% over the past year.
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Sealed Air Corporation (SEE): Free Inventory Analysis Report
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