Dividend Investing In The Packaging And Container Industry
As a dividend growth investor I am always on the lookout for reliable dividend paying stocks within industries that are very predictable, consistent and not subject to sudden shifts in their business models. Another way of saying this is, “boring is sexy.” My long term dividend growth portfolio reflects this aspect as consumer staples remain my largest sector overall with industrial and health stocks following. I just love the predictable nature of these sectors as their products and services are literally used everyday by the entire planet. You already know many of these quality names such as The Procter & Gamble Company (PG), Colgate-Palmolive Co. (CL), Unilever plc (UL), Johnson & Johnson (JNJ) and many, many more. Not too much that’s exciting or new about diapers, toothpaste, toilet paper, mayonnaise or Band-Aid’s and that’s exactly how I like to invest long term.
When considering “boring” businesses none seem to come close to the packaging industry. After all, how exciting can cardboard boxes or plastic wrap be? Well, the industry itself might not be that exciting but the sheer size is definitely enough to whet ones appetite for considering an investment. It is estimated that the global packaging industry is valued at approximately $424 billion annually with North America’s portion valued at $118 billion. Needless to say, the packaging industry is enormous. It’s interesting to see the material breakdown as well for this sector as everything, when you think about it, comes in a package whether it’s paper (36%), metal (17%), plastic (34%) or glass (10%). Food and beverages are the largest users of packaging while pharmaceutical and cosmetic products round out smaller portions of the sector.
When looking at the packaging sector, there are actually quite a few names that one might consider for a dividend growth portfolio. In fact, one name is a coveted dividend aristocrat. Let’s take a general look at some of those names starting with one of the larger names in the space, Sealed Air Corporation (SEE). Headquartered in Charlotte, NC, SEE provides food safety and product protection solutions worldwide. If you ever sent a package or mailed something that required additional protection you more than likely used a Sealed Air product. Brand names like Bubble Wrap, Instapak and Jiffy are common among padded envelopes and used widely. SEE currently yields 1.07% with a low payout ratio of 22.9% based on an EPS of 2.27. By most measures, though low yielding, this dividend appears to be safe with room for future growth. With a current PE of 41.2 and forward PE of 19.5 valuations appear to be a little rich at current prices. While not having the longest dividend track record among the names to be discussed, SEE has grown quite a bit especially within the last five years.
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