For investors looking for steady income, a methodical screening process can help find companies that provide more than a high stated yield. A frequent method uses filters for stocks with a good, lasting dividend record, backed by firm basic business soundness and earnings. This method focuses on the caliber and durability of the dividend payment over seeking the largest available yield, which can sometimes indicate basic trouble. By using tools like the ChartMill Dividend Rating with matching soundness and earnings scores, investors can create a list of companies prepared to provide steady income for the future.
Packaging Corporation of America (NYSE:PKG) appears as a candidate from this kind of screening method. The company, a top maker of containerboard and corrugated packaging products, offers a study in weighing dividend attraction with basic soundness.
Dividend Dependability and Increase
For income-oriented investors, the durability and increase path of a dividend are most important. PKG’s dividend record shows several good traits that match a quality dividend method.
- Record: The company has built a dependable past, having paid and, notably, not lowered its dividend for at least ten years. This steadiness is a key sign of management’s dedication to giving capital back to shareholders.
- Increase Path: PKG’s dividend is not fixed. It has increased at a good yearly rate of about 9.64% over the last five years, greatly exceeding inflation and adding to real income increase for shareholders.
- Durable Payout: The dividend payout ratio, which shows the part of earnings paid as dividends, is near 50.65%. This level is seen as workable; it gives a meaningful return to investors while keeping enough capital for the company to put back into its business, a balance key for long-term durability.
- Yield in View: With a present yield close to 2.29%, PKG gives a fair income flow that is strong within its field and above the wider S&P 500 average. This shows that the screen finds companies with decent, practical yields instead of seeking unworkable highs.
This mix of a long, uninterrupted payment history, a good increase rate, and a careful payout ratio forms the center of what dividend investors should look for: a steady and increasing income source.
Supporting Earnings
An increasing, steady dividend must be paid for by a profitable business. PKG’s operational soundness gives that needed base. The company gets a firm ChartMill Profitability Rating of 7, showing efficient use of its assets and capital.
Important earnings measures include:
- Return on Invested Capital (ROIC): At 9.72%, PKG’s ROIC is much above its field peer average. This shows the company is very good at creating profits from the capital it uses, a sign of a lasting competitive edge.
- Good Margins: The company keeps firm profit and operating margins that place it with the top companies in the containers and packaging field. This price strength and operational effectiveness are essential for handling economic changes and continuing dividend payments.
Good earnings are essential for a lasting dividend method. It makes sure the cash required for dividends is created naturally through successful operations, not from borrowing or asset sales.
Financial Soundness and Steadiness
The final part of a durable dividend stock is a firm balance sheet. Financial soundness makes sure a company can meet its duties and pay its dividend even during times of short-term earnings stress. PKG gets an 8 on the ChartMill Health Rating, showing a very good financial state.
Notable strong points here are:
- Liquidity: The company shows very good short-term financial room, with a Current Ratio of 3.16 and a Quick Ratio of 2.00. These ratios, which are with the best in its field, show PKG can easily cover its immediate debts.
- Solvency: PKG’s debt levels, as shown by its Debt/Equity and Debt-to-Free-Cash-Flow ratios, are workable and compare well to field peers. An Altman-Z score well in the safe area further points to a low short-term chance of financial trouble.
A company with high liquidity and careful debt handling is much less likely to be made to lower its dividend during an economic drop. This financial strength directly backs the main goal of steady income creation.
Value and Increase Points
While the screen focuses on dividend quality, earnings, and soundness, a full view needs noting other factors. PKG’s present value, based on standard price-to-earnings measures, seems somewhat high compared to its field, though it matches the wider market. This extra cost may show the market’s recognition of its stable business model and steady shareholder returns.
On increase, the company shows a positive direction. After a time of small historical increase, analysts forecast a rise in both earnings and income over the next years. A rising increase record, when joined with the existing dividend increase, can be a strong mix for total return.
A complete look at all these basic factors is in the full ChartMill Fundamental Analysis Report for PKG.
Conclusion
Packaging Corporation of America shows the kind of company a quality dividend screen tries to find. It gives a dividend marked by a long history of dependability and good increase, supported by good earnings and a very firm balance sheet. For investors whose method focuses on lasting and increasing income over uncertain yield-seeking, PKG offers a strong case for more study based on its basic qualities.
Want to look at other stocks that pass similar quality dividend filters? You can use the "Best Dividend Stocks" screen yourself to see the present list of candidates by clicking here.
Disclaimer: This article is for information only and is not financial advice, a suggestion, or a deal to buy or sell any securities. The information given is based on supplied data and should not be the only base for any investment choice. Investors should do their own separate study and talk with a qualified financial advisor before making any investment choices. Past results do not show future outcomes.
