Assessing the Sustainability and Growth of PKG's Dividend
Packaging Corp of America (PKG, Financial) recently announced a dividend of $1.25 per share, payable on 2024-01-15, with the ex-dividend date set for 2023-12-15. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Packaging Corp of America's dividend performance and assess its sustainability.
What Does Packaging Corp of America Do?
Packaging Corp of America is the third-largest containerboard and corrugated packaging manufacturer in the United States. It produces over 4 million tons of containerboard annually. The company's share of the domestic containerboard market is roughly 10%. The firm differentiates itself from larger competitors by focusing on smaller customers and operating with a high degree of flexibility.
A Glimpse at Packaging Corp of America's Dividend History
Packaging Corp of America has maintained a consistent dividend payment record since 2003. Dividends are currently distributed on a quarterly basis. Packaging Corp of America has increased its dividend each year since 2009. The stock is thus listed as a dividend achiever, an honor that is given to companies that have increased their dividend each year for at least the past 14 years. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Packaging Corp of America's Dividend Yield and Growth
As of today, Packaging Corp of America currently has a 12-month trailing dividend yield of 3.03% and a 12-month forward dividend yield of 3.03%. This suggests an expectation of same dividend payments over the next 12 months.
Over the past three years, Packaging Corp of America's annual dividend growth rate was 14.60%. Extended to a five-year horizon, this rate decreased to 12.40% per year. And over the past decade, Packaging Corp of America's annual dividends per share growth rate stands at an impressive 14.50%.
Based on Packaging Corp of America's dividend yield and five-year growth rate, the 5-year yield on cost of Packaging Corp of America stock as of today is approximately 5.44%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-09-30, Packaging Corp of America's dividend payout ratio is 0.57.
Packaging Corp of America's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Packaging Corp of America's profitability 8 out of 10 as of 2023-09-30, suggesting good profitability prospects. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Packaging Corp of America's growth rank of 8 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and Packaging Corp of America's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Packaging Corp of America's revenue has increased by approximately 7.30% per year on average, a rate that outperforms approximately 51.77% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Packaging Corp of America's earnings increased by approximately 13.30% per year on average, a rate that outperforms approximately 59.18% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 9.80%, which outperforms approximately 57.53% of global competitors.
Next Steps
In conclusion, Packaging Corp of America's consistent dividend payments, robust dividend growth rate, moderate payout ratio, strong profitability, and solid growth metrics paint a promising picture for value investors. With a history of resilience and a forward-looking approach, the company stands as a potentially attractive option for those seeking steady income and long-term investment growth. As we anticipate the next dividend payment, it's worth considering how Packaging Corp of America fits into an investor's portfolio strategy. Will its dividend trend continue to provide a reliable stream of income? GuruFocus Premium users can explore further using the High Dividend Yield Screener to find similar high-performing dividend stocks.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
