PKG Surges 75% This Year on Profit Improvement
Packaging Corporation of America (PCA) (NYSE:PKG) said today that it plans to increase the quarterly cash dividend by 15% as the company reported record second-quarter earnings.
The quarterly cash dividend on its common stock will increase the annual payout to $2.52 per share from $2.20 per share, representing a 15% increase. The first quarterly dividend of $0.63 per share will be paid on October 14, 2016. (Source: “Packaging Corporation of America Announces 15% Dividend Increase,” Packaging Corporation of America, August 31, 2016.)
“This announcement marks the sixth time in the last six years that PCA has increased the dividend on its common stock,” Mark Kowlzan, chief executive officer of Packaging Corporation of America, said in the statement. “This reflects PCA’s on going commitment to generating value and returning cash to shareholders.”
PCA is the fourth-largest producer of containerboard and corrugated packaging products in the U.S. and the third-largest producer of uncoated free-sheet paper in North America. PCA operates eight mills and 95 corrugated products plants and related facilities.
The increase in cash dividend comes after PCA reported record second-quarter earnings despite lower pricing in packaging and paper products. Its diluted earnings per share rose to $1.25 per share, up from $1.18 per share for the same period a year ago.
Going forward, PCA expects a third-quarter profit of $1.30 per share as the company benefits from higher containerboard, corrugated products, and white paper shipments.
“Paper prices should move higher reflecting continued realization of the announced price increases, and our annual outage costs will be lower. We expect a less rich mix in corrugated products and higher prices for recycled fiber, electricity and fuels,” Kowlzan told investors in July. (Source: “Packaging Corporation of America Reports Second Quarter 2016 Results,” Packaging Corporation of America, July 20, 2016.)
Shares of the Lake Forest, Illinois-based manufacturer have been responding to this positive news, surging 75% since February this year and trading at $78.94 in New York today.
The company also announced in August that it has completed its acquisition of TimBar Corp., a large independent corrugated products producer, in a cash- and debt-free transaction. Funding for the acquisition came from a new $385.0-million, five-year-term loan facility. (Source: “Packaging Corporation of America Completes Acquisition of TimBar Corporation,” Packaging Corporation of America, August 29, 2016.)
“Integrating these new operations into PCA will quickly enhance our financial results while maintaining a strong balance sheet,” Kowlzan said in the statement.