Richards Packaging: The Safest Company In North America Gives You A 9% Dividend

Jan.30.13 | About: Richards Packaging (RPKIF)

Richards Packaging (OTC:RPKIF) is the oldest and largest paper packaging distributor in Canada and the 3rd largest in North America. It has successfully navigated 100 years of every type of business, regulatory, economic, political, currency, and any other type of cycle you can think of, and thus proves itself to be rock solid and safe. These guys know the business they run.

Such stellar quality shows up in their 9% dividend yield (paid monthly), 2% share buy back program, and strong share price performance.

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A long history of strong dividends, broken by a 6 month stretch in mid 2009 in a defensive measure to hoard cash at the depths of the economic contraction and liquidity crisis, saw the company quickly return to a strong dividend and implement a share buy back program targeting 2% of the outstanding float annually. The buy back program continues now and into March 2013 and is expected to be renewed for the coming fiscal year again.

A customer base of over 11,000 regional food, wine and spirits, cosmetic, specialty chemical, pharmaceutical and other companies throughout North America insures robust breadth and depth rarely equaled in a niche services and materials provider.

The shares trade on the Toronto Exchange as RPI.UN and are denominated in Canadian Dollars. This offers an excellent currency hedge against the long term weakening trend of the U.S. Dollar. The strong Canadian dollar has grown from a 20% discount to the US dollar in 2009 to parity currently and continues to show an up trending chart.

Chart forCAD/USD (CADUSD=X)

When you find a 100 year old company with consistent performance, a history of reliable dividends and slow price appreciation (remember that the stock price chart above is in Canadian dollars, which have appreciated relative to USD by 20% since the lows of 2009), you have to ask if there is any reason it shouldn't be a large part of your portfolio. There is one cautionary caveat: These shares are very thinly traded with only about 11,000 shares averaged per day. Thus this investment for income and appreciation is somewhat illiquid. But at 9% and a slowly rising trend, buoyed with buy back programs and currency appreciation, you aren't going to be thinking sell without some very long foresighted planning.

This stock is so good that it scares me. It is one of the top 3 in my portfolio both in holdings value and in income and price appreciation and it continues to be so. Who says 9% has to be risky?

Disclosure: I am long OTC:RPKIF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am actually long RPI.UN traded on the Toronto Exchange rather than the RPKIF.PK traded on the OTC pink pages.