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Packaging Corporation of America Boosts Dividend by 27%

Packaging Corporation of America (PKG) is one of the largest producers of containerboard and corrugated packaging in the United States, as well as the third-largest producer of uncoated freesheet in North America by production capacity.

The company’s packaging segment includes six containerboard mills and over 90 converting operations that produced about 4.2 million tons of containerboard and shipped about 59.4 billion square feet of corrugated products in 2019. Meanwhile, it’s paper segment, operating under the Boise Paper brand, manufactures and sells white paper at two U.S.-based white paper mills.

Pandemic and Stimulus Drive Results

The North American containerboard industry’s fundamentals are the best they’ve been in 25 years thanks to the pandemic and the related U.S. stimulus, said KeyBanc analyst Adam Josephson in a recent research note. While the strength may not last forever, packaging companies have experienced strong fundamental growth over the past few quarters.

Packaging Corporation of America reported third quarter revenue that fell 3.4% to $1.69 billion, beating consensus estimates by $50 million, with non-GAAP earnings per share of $1.57 per share, beating consensus estimates by $0.15 per share. Despite hurricane-related disruptions, the company ended the quarter with record total box shipments and shipments per day, although its paper segment continued to be challenged by pandemic-related declines.

The strong financial results led the company to increase its dividend by 27% to $1.00 per share, which represents a 2.95% forward yield. The dividend is payable on January 15, 2021 to shareholders on record as of December 21, 2020.

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