WestRock: Nothing Rocky About The 4.35% Dividend Yield

Summary

• WestRock shares have declined 25% since the merger in 2015.
• What stands out is that the company performed well during this period, which leads to the conclusion that the decline came on the back of macro-economic pressure.
• The company is in a good position to benefit from the dynamically changing consumer preferences and the industry outlook is positive.
• The global presence, especially in developing markets, will be key to earnings growth in the next 5 years.
• Dividend distributions are safe from a cash flow perspective and the fears are overblown. Shares deserve to trade at a much higher price.

Source: Westrock.com

Investment thesis

WestRock Company (WRK) is operating in an industry that is dynamically changing due to changing consumer preferences and regulatory involvement around the world. The company, as a result of strategic investments in the last couple of years, is in a good position to benefit from these changes even though some of its peers might find it difficult in the next few years. The strong presence in developing regions of the world will be a catalyst for growth in the next five years as well.

The decline of the share price since 2015, despite a strong financial performance, has pushed the shares into undervalued territory. More importantly, shares yield 4.35% and a dividend cut is highly unlikely. On the contrary, dividend per share has grown in each of the last four years and the management is committed to distributing wealth to shareholders through dividends and buybacks.

The story of WestRock

WestRock Company was born in 2015 with the completion of the combination of MeadWestvaco Corporation and Rock-Tenn Company. Today, the combined company is one of the largest providers of paper and packaging solutions in the world, with an estimated headcount of over 50,000 across 30 countries.

The company manufactures and sells paper and packaging solutions for the consumer and corrugated markets in countries across the world, including the U.S. and Canada. The company provides various packaging products and solutions under both these segments.

Corrugated segment	Consumer segment
Containerboards	Folding and beverage cartons
Corrugated sheets	Express mail packages
Corrugated packaging	Printed packaging products
Preprinted linerboards
Structural and graphic design

Click to enlarge

Source: Company filings

The company caters to customers representing a variety of industries and business sectors, and the management wants to establish a strong presence in all these business segments to ensure the company would be

Analyst’s Disclosure:I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.