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Packaging Corporation of America's (NYSE:PKG) investors are due to receive a payment of $1.25 per share on 15th of July. This payment means that the dividend yield will be 2.8%, which is around the industry average.
We check all companies for important risks. See what we found for Packaging Corporation of America in our free report.
Packaging Corporation of America's Payment Could Potentially Have Solid Earnings Coverage
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. The last dividend was quite comfortably covered by Packaging Corporation of America's earnings, but it was a bit tighter on the cash flow front. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.
The next year is set to see EPS grow by 27.7%. If the dividend continues on this path, the payout ratio could be 45% by next year, which we think can be pretty sustainable going forward.
See our latest analysis for Packaging Corporation of America
Packaging Corporation of America Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2015, the dividend has gone from $1.60 total annually to $5.00. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
We Could See Packaging Corporation of America's Dividend Growing
The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Packaging Corporation of America has grown earnings per share at 6.8% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Packaging Corporation of America's payments, as there could be some issues with sustaining them into the future. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We don't think Packaging Corporation of America is a great stock to add to your portfolio if income is your focus.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Earnings growth generally bodes well for the future value of company dividend payments. See if the 9 Packaging Corporation of America analysts we track are forecasting continued growth with our free report on analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.