Income investors looking for a high-quality dividend stock should consider Sonoco Products (SON). The company provides packaging, industrial products, and supply chain services to its customers, which include companies in the appliances, electronics, beverage, construction, and food industries, advises Bob Ciura, contributing editor at Sure Dividend.
The company generates more than $7 billion in annual sales. Sonoco Products is now composed of two segments, Consumer Packaging and Industrial Packaging, with remaining businesses listed as “all other”.
On Oct. 31, SON reported third-quarter results for the period ending Oct. 1. For the quarter, revenue decreased 9.5% to $1.7 billion. Adjusted earnings per share of $1.46 compared unfavorably to $1.60 in the prior year, but this was $0.18 more than expected. For the quarter, Consumer Packaging revenues were down by 9% to $938 million due to lower volumes and prices.
Sonoco Products provided an updated outlook for 2023 as well, with the company now expecting adjusted earnings per share of $5.25 to $5.40 for the year. This means the company will remain highly profitable, even though growth has slowed, which allows SON to continue to increase its dividend.
On April 19, Sonoco Products raised its quarterly dividend 4.1% to $0.51, extending the company’s dividend growth streak to 41 consecutive years. The company has grown earnings per share at a rate of 12.2% since 2013.
A key competitive advantage for Sonoco Products is that the company is usually able to pass along rising raw material and transportation costs to its customers. Ability to pass along costs is an advantage as this shows that the company’s offerings are in demand.
Also helping grow the top and bottom lines is Sonoco Products’ history of acquisitions. The Ball Metalpack, Conitex, and Can Packaging acquisitions are prime examples of growing through acquisitions.
We maintain our expected growth rate of 5% due to the high base from which earnings are starting. Sonoco Products also has a very reasonable dividend payout ratio of just over 38% based off our expectations for 2023. In fact, we project that dividend growth can continue for years to come.
