The most recent dividend increase was in February, when the Board of Directors approved a 4.40% increase to 24 cents/share. The major competitors of Bemis Company include Sonoco Company (SON), Sealed Air (NYSE:SEE) and Temple-Inland (TIN).
Over the past decade this dividend growth stock has delivered an annualized total return of 10.10% to its loyal shareholders. The company has managed to deliver an increase in EPS of 3.70% per year since 2001. Analysts expect Bemis to earn $2.40 per share in 2011 and $2.68 per share in 2012. This would be a nice increase from the $1.83/share the company earned in 2010.
The company's strategy includes acquiring businesses that offer scale, access to new products and markets as well as superb packaging know-how. In 2010 Bemis acquired Alcan Packaging Foods Americas Unit from Rio Tinto (RTP) for $1.20 billion. This deal is expected to be accretive to EPS within 12 months. Bemis is also focusing its efforts on innovation in flexible packaging, in order to solidify its position in the market. Food packaging generates over two-thirds of the companies revenues. The positive fact from this is that since demand for food products is relatively stable, demand for Bemis's packaging should be relatively unaffected by economic weakness, as long as it maintains its market share. The rising commodity costs could affect earnings. Sales in the US also account for almost two-thirds of revenues. Europe accounts for over 15% of revenues. Sales to emerging markets in South America and Asia could generate strong volume growth for Bemis, because of the strong demand for packaging that extends the shelf life of goods there.
Over the past decade, the return on equity has been in a steady decline. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.
The annual dividend payment has increased by 7% per year since 2001, which is higher than the growth in EPS. A 7% growth in distributions translates into the dividend payment doubling every 10 years. If we look at historical data, going as far back as 1984, we see that Bemis has actually managed to double its dividend every seven years on average.
Over the past decade the dividend payout ratio has steadily increased. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.
Currently Bemis is trading at 17.60 times earnings, yields 2.90% and has a sustainable dividend payout. Despite the fact that the stock meets my entry criteria, the sluggish earnings growth coupled with high payout ratio make this otherwise fine dividend stock a hold.
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