Packaging Corp. Of America Wraps Up A Flat Base


Many stocks have recently formed flat bases. Packaging Corp. of America ( PKG ), or PCA, is one of them.

The flat base shows boxy, sideways trading, which PCA has done in recent weeks while receiving support at its 10-week moving average. PCA has been in a steep uptrend since hitting a low in June 2012.

PCA's latest pattern is the latter part of a base-on-base formation. Since it rose less than 20% from its prior breakout before settling into a new base, the new pattern is deemed a base on base. It's also counted as one base.

It's professional buying that can take a stock sharply higher. At the end of the second quarter, 553 funds had positions in PCA, up from 461 three quarters before that.

The Lake Forest, Ill.-based firm makes containerboard, corrugated containers, retail packing products and packing supplies. In recent years, it has a stable earnings history. The stock has a three-year Earnings Stability factor of 16 (zero is most stable, 99 is least stable) and a five-year Earnings Stability of 24.

Recent quarterly results have been solid. Profit jumped 48% and 45% in Q1 and Q2 respectively on sales gains of 12% each. Analysts polled by Thomson Reuters see its full-year profit rising 49% for the year. The estimate was revised higher recently.

PCA has boosted its dividend already twice this year. In January, the company sweetened its dividend by 25%. In May, it hiked it by 28% to the current quarterly rate of 40 cents a share. Its next dividend will be paid Oct. 15 to shareholders of record Sept. 13.

On an annual basis, PCA pays $1.60 a share for a yield of about 3%, about 50 basis points more than that of the S&P 500. PCA has the second highest yield among the 12 dividend-paying stocks in the Paper & Paper Products group.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

This article appears in: Investing , Investing Ideas

Referenced Stocks: PKG

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