Packaging Corporation of America Boost Quarterly Dividend 25% (PKG)

Packaging Corporation of America (NYSE:PKG) continued its record of rising dividends with a 25.4% boost to its current quarterly dividend and rewards its investors with an above-industry-average dividend yield of 2.6%.

Over the past 14 years since initiating dividend distributions, the company cut its quarterly dividend only once and missed an annual dividend hike only once as well. In addition to distributing outsized and rising dividend income for more than a decade, the company also provided its shareholders with robust asset appreciation that experienced only one significant pullback, in 2015. The combined benefits of the rising dividend income and the growing share price rewarded the company’s shareholders with a total return of nearly 20% over the past 12 months and a triple-digit-percentage total return over the past five years.

The Packaging Corporation of America will distribute its next dividend on July 13, 2018, to all its shareholders of record prior to the June 14, 2018, ex-dividend date.

Packaging Corporation of America (NYSE:PKG)

Currently headquartered in Lake Forest, Illinois, and tracing its origins to the 1867 formation of the North Star Mill in Quincy, Illinois, the Packaging Corporation of America manufactures and sells containerboard and corrugated packaging products primarily in the United States. The company’s Packaging segment offers various corrugated packaging products, honeycomb protective packaging products and multi-color boxes and displays that help to merchandise the packaged product in retail locations. Additionally, the company produces packaging for meat, fresh fruit and vegetables, processed food, beverages and other industrial and consumer products. The company’s Paper segment manufactures and sells white papers comprising commodity and specialty papers with various features, such as colors, coatings, high brightness and recycled content. The white papers also consist of communication papers, including office, printing and pressure sensitive papers. As of May 2018, PKG operated  more than 120 facilities in 94 locations across 34 U.S. states. Additionally, the company has a creative design center in Hong Kong and a honeycomb protective packaging material plant in Canada near Toronto.

The company’s share price has more than doubled since embarking on its current uptrend more than two years ago. Riding this uptrend, the share price reached its 52-week low at the very beginning of the 12-month period on June 1, 2017, which was at the time the company’s all-time high price. However, the share price continued to rise and set new all-time highs on the way to its most recent peak price of $129.58 on January 8, 2018.

Unlike many other stocks that experienced significant share price declines during the overall market pullback in February and March 2018, PKG’s share price declined only slightly and closed on May 31, 2018, at $119.50, which was just 7.8% below the all-time high from early January. Additionally, the $119.50 closing price was 15% above the 52-week low from one year earlier and 144% higher than it was five years ago.

The company boosted its quarterly dividend payout 25.4% from the $0.63 amount in the previous quarter to the current $0.79 payout. This new quarterly dividend distribution corresponds to a $3.16 annualized amount and a 2.6% yield, which is almost 6% higher than the company’s own 2.5% average yield over the past five years.

In addition to outperforming its own historical yield average, PKG’s current 2.6% yield is 36% above the simple average yield of the overall Consumer Goods sector, 11% higher than the 2.38% average yield of all the companies in the Packaging & Containers industry segment and even 1% above the average yield of the segment’s only dividend-paying companies.

The company boosted its annual dividend three out of four years after the dividend introduction in 2003 and then cut its quarterly dividend 50% in the second quarter of 2009 to a $0.15 payout. However, the company resumed its annual dividend hikes in 2011 and within three years exceeded the $1.20 annual dividend amount from 2008 before the dividend cut. Since resuming the annual dividend boosts, PKG advanced its total annual dividend payouts more than five-fold by increasing its annual dividend amount at an average rate of more than 23% per year.

The combination of the company’s rising dividend distributions and the robust asset appreciation rewarded the shareholders with a total annual dividend of more than 18% over the past 12 months and an 81% total return over the past three years. The total return over the past five years was an even more impressive 163%.

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