As an income-driven investor who is always in search of a sustainable yield, I've decided to take my research to the paper products sector. After using a simple screen on Yahoo! Finance (and cross-referenced using Finviz.com) to determine which stocks in the paper products sector that pay a dividend, I had compiled a list of nine dividend-paying companies.
Of those nine dividend-paying companies, a total of three yield at least 2.50% and pay an annual dividend of at least $1.00, (which is roughly 10 to 15 times that of most simple savings accounts) and they are Orchid Paper Products Company (NYSEMKT:TIS) (5.00% yield, $1.20 annual dividend), Schweitzer-Mauduit International Inc. (NYSE:SWM) (3.18% yield, $1.20 annual dividend), and International Paper (NYSE:IP) (2.57%, $1.20 annual dividend). In this article I plan on taking a closer look at each of these companies and several of the reasons why I've decided to stay long on all three.
Orchid Paper Products Company - Based in Pryor, Oklahoma the company engages in the manufacturing, distribution and sale of various private label tissue products for the consumer market. Its products include paper towels, bathroom tissue, and paper napkins under such brand names, Colortex, My Size, Velvet, Big Mopper, Soft & Fluffy, Tackle, Nobel, and several others.
Shares of TIS, which are currently priced at $23.77 and have a forward yield of 5.00% ($1.20), are considered to be in the midst of an uptrend since they are trading 8.51% above their 20-DSMA, 9.36% above their 50-DSMA, and 25.49% above their 200-DSMA. From a growth perspective shares of TIS have risen 10.71% since January 1st.
One of the things income investors should note is the fact that Orchid Paper Products has increased its dividend twice in the last 12 months. The first increase was announced November 15th and represented a 25% increase over its last quarterly distribution of $0.20/share, and the second was announced on March 7th and that represented a 20% increase over the company's previously announced distribution of $0.25/share.
When it comes to Orchid Paper Products there are two things I happen to find attractive, especially when it comes to the company's 2012 annual report, and they are the company's 49% increase in year-over-year net income and its 3% increase in year-over-year net sales.
According to the company's President and CEO, Robert Snyder, "We are pleased to announce that our full year results include record sales levels for both converted product and total net sales, with converted product shipments of just over 7 million cases. This achievement continues our long-term trend of increasing sales. Shipments of the previously announced new business gains of approximately 1.1 million cases are proceeding within our expectations and we are off to a strong start in 2013. Additionally, we have secured additional new business that we expect will increase our annual run rate by the third quarter of 2013 to approximately 9 million cases." If the company can successfully hit and subsequently surpass its target of 9 million cases we could see a year-over-year increase in the company's revenue and its net sales as well.
Schweitzer-Mauduit International Inc. - Based in Alpharetta, Georgia the company which operates in two segments, Paper and Reconstituted Tobacco, considers itself to be a premier specialty company that has become a global leader of engineered solutions for the tobacco industry worldwide.
Shares of SWM, which are currently priced at $37.74 and have a yield of 3.18% ($1.20), are considered to be in two-thirds of an uptrend since they are trading 2.39% above their 20-DSMA, 3.02% below their 50-DSMA, and 7.72% above their 200-DSMA. From a growth perspective shares of SWM have fallen 5.58% since January 1st.
One of the things income investors should note is that when it comes to the dividend behavior of Schweitzer-Mauduit International the company had paid the same quarterly dividend of $0.075/share for nearly 16 years (from May 1996 until May 2012). The good news for income investors is the fact that since May 2012 the company has increased its dividend on two separate occasions and now pays a quarterly distribution of $0.30/share.
When it comes to Schweitzer-Mauduit International there are two things I happen to find attractive, especially when it comes to the company's 2012 annual report, and they are the company's 16.45% increase in year-over-year adjusted operating profits and its 110.55% increase in year-over-year cash flow.
According to the company's Chairman and CEO, Frédéric Villoutreix, "With that in mind, going forward we intend to return at least one third of annual free cash flow to shareholders. The doubling of our quarterly dividend and implementation of a new share repurchase program are reflective of our commitment to this new capital allocation strategy and our confidence in the long-term strength of the company." If the company can continue to demonstrate increases in its year-over-year cash flows, the biggest beneficiary to such increases are clearly its shareholders. From an income perspective, we've seen SWM make some considerable strides and if the company can continue to increase its dividend at least once annually, then this stock could be indeed a keeper for mostly any income-driven portfolio.
International Paper - Based in Memphis, Tennessee and according to its website, International Paper is a global leader in the paper and packaging industry with manufacturing operations in North America, Europe, Latin America, Asia and North Africa.
Shares of IP, which are currently priced at $46.78 and possess a yield of 2.57% ($1.20), are considered to be in the midst of an uptrend since they are trading 8.95% above their 20-DSMA, 12.31% above their 50-DSMA, and 32.78% above their 200-DSMA. From a growth perspective shares of IP have risen 15.53% since January 1st.
One of the things income investors should note is the fact that International Paper has increased its dividend three times since November 2010. The first increase of $0.063/share was paid on February 11th 2011 and represented a 50.40% increase over its last quarterly distribution of $0.125/share, the second was paid on May 13th 2011 and that represented a 39.89% increase over the company's previous announced distribution of $0.188/share, its last (and most recent) increase was paid on November 13th 2012 and that represented a 14.06% increase over its previously announced dividend of $0.263/share.
When it comes to International Paper there are two things I happen to find attractive, especially when it comes to the company's 2012 annual report, and they are the company's 6.92% increase in annual sales and its 7.60% increase in its year-over-year operating profits directly related to its Industrial Packaging segment.
According to John Faraci, Chairman and CEO of International Paper, "the company's success capturing merger benefits from the Temple-Inland acquisition contributed to our fourth quarter results and the record cash generation from operations in 2012." If International Paper can continue to reinforce its successful growth-by- acquisition strategy as proven by its Temple-Inland acquisition, shareholders could continue to not only see a rise in share price but a continued upswing in its annual dividend as cash flows continue to rise.
Disclosure: I am long IP, SWM, TIS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.