By now everyone should know what we are trying to achieve with the Team Alpha Retirement Portfolio. The main goal is growing income for those of us retired, and those of us who are building a portfolio for a more secure financial future.
When we can find a stock that seems to fly under the radar for the most part, but happens to qualify as a dividend champion at the same time, we should jump on it. If I were to tell you that the stock also appears to be undervalued by a popular metric, then we might have found a real winner for both capital appreciation and dividend growth.
Sonoco Products (SON), appears to be one of those rarities. The stock just keeps moving higher, the dividend just keeps getting increased (29 years in a row), and it is perhaps one of the more boring companies for investors to watch.
Sonoco Products Never Goes Out Of Style
The company, formerly known as Southern Novelty Company, was founded in 1899 and is based in Hartsville, South Carolina; here is its description, from Yahoo Finance:
Sonoco Products Company engages in the manufacture and sale of industrial and consumer packaging products in the United States, Europe, Canada, and other regions. The company operates in four segments: Consumer Packaging, Paper and Industrial Converted Products, Display and Packaging, and Protective Solutions. The Consumer Packaging segment provides round composite cans, shaped rigid paperboard containers, fiber caulk/adhesive tubes, plastic bottles, jars, jugs, cups, and trays, printed flexible packaging, rotogravure cylinder engraving, and global brand management products, as well as aluminum, steel, and peelable membrane easy-open closures for composite and metal cans.
The company actually has a large global footprint. Not that you will ever notice its products, but by industry standards, it is a recognized leader. Sonoco even wins awards!
No, the company does not make peanuts, but it will save money for Planters with this design. Sonoco makes all the packaging for Planters as well as thousands of other companies around the globe, while winning numerous awards aside from the new Planters "crown":
- Gold, Supermarket/Grocery Stores category - Unilever Vaseline® Spray & Go™ Launch Floorstand Display
- Silver, Mass Merchandisers category - Robert Bosch STEEL TECH™ Wiper Endcap; Unilever Vaseline® Spray & Go™ Launch National In-Store Campaign (comprised of five display vehicles)
- Bronze, Drug Stores category - Elizabeth Arden Someday® by Justin Bieber Launch Etagere; Unilever Vaseline® Spray & Go™ Launch Counter Display
"Once again, our talented group has proven Sonoco's ability to satisfy its customers by providing award-winning, high-impact retail merchandising displays," said Jeff Tomaszewski, general manager, Sonoco Display and Packaging.
Needless to say that product packaging will be around for awhile longer. Don't get me wrong folks, we are not talking about a new Tesla (TSLA) car! What we are talking about is a company that has 170 years of business under its belt, has a low PE in relation to a car company that has not found its footing as yet, and is ignored by just about 100% of all TSLA shareholders I would guess!
Tesla has now disappointed shareholders, and I believe the company has a rocky road. Sonoco has bored investors to sleep, but will pay investors quite nicely to own shares and surprisingly should continue to grow its business.
The Fundamentals Are Impressive
Here are just some of the highlights of Sonoco's last earnings report:
The Hartsville, SC based company reported third quarter earnings of $61.2 million, or 59 cents per share, up from $58.8 million, or 57 cents per share last year.
Excluding special items related to restructuring expenses, earnings were 63 cents per share, above the average analyst estimate of 61 cents per share.
Total revenue for the quarter rose 3% to $1.23 billion, from $1.2 billion last year. Analysts expected to see revenue of $1.24 billion.
A snippet lower than analysts expected on the revenue side, but still up for the quarter.
To be sure, analysts have a neutral rating (on average) of the stock, and I believe they just do not see the "sexiness" of this stock, or the company! I certainly do, which is why I will be adding shares to the Team Alpha Retirement Portfolio.
The most important reasons for me, can be shown in one simple chart:
Call me old fashioned, but if a stock keeps moving higher, continues to increase dividends at nearly a 4% per year rate for 29 years in a row, and has a price to sales ratio at less than dollar for dollar, that to me is a stock I want in my portfolio, even if I am just now bumping into it.
I would love to get the stock cheaper as the current dividend yield is "only" 3.10%, but this is one of those stocks that I will accumulate on any pullback.
After all, everything is packaged at some point, even a Tesla!
The Bottom Line
I like the company, the stock, the dividend, and the price action. With a beta of just .92, and an average daily share volume of just 375k shares changing hands, this low volatility stock should fit quite well in just about any dividend seeking investors portfolio.
As previously stated, I will be buying shares of SON in the next few trading days, after I figure out which stock I want to sell to pay for the shares. I MIGHT take some profits from some strong gainers, OR dump a loser like Newmont Mining (NEM).
Your thoughts on the matter would be appreciated by the way. Once I decide, I will let my readers know what I have done. My e-mail early alert service is available to everyone for free so you do not miss ANY Seeking Alpha article of mine.
Maybe in 10-15 years, we can all buy a Tesla with some of the money we made in SON!