Published Thu, 19 Jul 2018 12:48:58 -0400 on Seeking Alpha
Packaging Corporation of America (PKG) offers dividend growth investors the opportunity to gain exposure to the rapid growth of e-commerce at an attractive yield. Though the packaging industry is growing increasingly competitive, pressuring businesses to leverage their balance sheets to outmaneuver the competition via acquisitions, the strong growth trend leaves plenty of space for multiple competitors. PKG management appears to be managing its balance sheet prudently while still positioning the company for success. Meanwhile, the low payout ratio, high free cash flow yield, and strong growth momentum imply continued robust dividend growth is ahead.
Safety PKG's dividend appears to be quite safe, backed by a solid balance sheet, stable operating results, and a low payout ratio relative to both earnings and free cash flow. Moody's seems to agree, recently upgrading its credit rating to a highly respectable Baa2 and giving it a stable outlook.
Though leverage may at first appear high at 2.7x and debt to equity is 1.1, it is actually fairly low for the industry (rival International Paper Co (IP) has leverage of 4.7x and debt to equity of 1.49). Furthermore, it is trending in the right direction, with leverage and debt to equity declining substantially from 2013 (when they stood at 3.96x and 1.93 respectively). Additionally, it enjoys a very strong 2.72 current ratio and 1.5 quick ratio, leaving it with plenty of balance sheet liquidity.
PKG's stable operating... Read more
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