Packaging Corp. Offers Growth, Packs Big Dividend

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Growth is good, but accelerating growth is better. The latter tells you that business is really picking up steam.

Packaging Corp. of America ( PKG ), or PCA, has delivered accelerating top- and bottom-line growth in recent quarters. It also pays an above-market dividend.

Earnings growth has picked up for three straight quarters (from 8% to 26% to 28% to 53%) for the maker of containerboard, corrugated containers and packaging supplies. Sales growth ramped up in the past two periods (7%, 8%, 13%).


From its Q4 results given in January, PCA's adjusted profit jumped 53% to 61 cents a share -- the best in seven quarters. Helped by higher selling prices, revenue grew 13% to $736.6 million. That marked its first double-digit year-over-year gain in nearly two years.

PCA has had a rocky annual earnings history. In the past five years, earnings fell in two years and was flat in one. It has a three-year Earnings Stability Factor of 19 and a five-year Stability Factor of 26.

Analysts see its full-year profit rising 39% to $2.87 a share this year. It was recently revised higher.

During hard economic times in 2009, PCA slashed its quarterly dividend to 15 cents a share from 30 cents a share. But the company has since raised its payout to shareholders in recent years. In January, PCA increased its annualized dividend by 25% to $1.25 a share.

PCA has a yield of about 2.9%, higher than the 2.48% for the S&P 500. It has the third-highest yield in the Paper & Paper Products group.

The stock is near a record high after a second rebound off its 10-week moving average. It cleared a 37.06 buy point from a second-stage flat base in December.

Mutual fund ownership of the stock has grown sharply in the past three quarters.



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



This article appears in: Personal Finance , Investing Ideas

Referenced Stocks: PKG

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