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Packaging Sector Update 6-25-15

I began following this sector in Q3 of 2014. I would have expected the earnings projection accuracy for this sector to be superior. I would have expected superior earnings visibility. That is not turning out to be the case. I am re-thinking my RRR assessments. Until that exercise is completed, I do not feel comfortable showing my "yield + CAGR - RRR" spreadsheet. I was attracted to this sector due to its great EPS and dividend growth. The sector also has 'growth at an acceptable yield'. But . . . . 'growth at an acceptable yield' is often the result when earnings projection oscillations are high.

Packaging Portfolio 6-25-15

The Q2-15 dividend is used for yield calculations. The second Dividend/EPS ratio has the 2015 EPS projection as the denominator. "Div 1 yr" measures the change in the dividend since Q2-14. "Div 5 yr" measures the average change in the dividend since Q2-10. RKT had a two for one stock split on 8-28-14 - and that is not yet reflected in the pricing in the data below. On 1-28-15 RKT agreed to combine with MeadWestvaco or MWV to form a new and yet unnamed company. On 1-30 RKT declared a dividend of $0.320525/share, reflecting the regular quarterly dividend payment of $0.1875 per share plus an additional amount of $0.133025 per share which equalizes the absolute dividend between RockTenn and MeadWestvaco. This moved the payout ratio from 18% to 30%. On 2-26 PKG increased its Q2 dividend from $0.40 to $0.55 with the payout moving from 32% to 44%.


    12-31-14 6-25 Div Current Div/ Div/ Percent Change
Company Price Price /Quarter Yield EPS15 EPS16 Price Pr+Div EPS15 Target Div 1yr Div 5yr

Aptar Group, Inc. (NYSE:ATR) 66.84 64.28 0.280 1.74 40 % 36 % -3.83 -2.99 -11.11 0.66 0.00 17.33
Ball Corporation (NYSE:BLL) 68.17 72.55 0.130 0.72 15 % 13 % 6.43 6.81 -12.07 24.70 0.00 32.00
Bemis Company, Inc. (BMS) 45.21 45.97 0.280 2.44 43 % 40 % 1.68 2.92 3.60 -3.97 3.70 4.35
Greif, Inc. (NYSE:GEF) 47.23 37.15 0.420 4.52 97 % 77 % -21.34 -20.45 -37.77 -26.53 0.00 0.00
International Paper Company (NYSE:IP) 53.58 48.37 0.400 3.31 41 % 37 % -9.72 -8.23 -1.76 3.60 14.29 220.00
Mobile Mini, Inc. (NASDAQ:MINI) 40.51 43.35 0.188 1.73 51 % 40 % 7.01 7.94 -5.19 -4.11 10.29 Infinity
Packaging Corporation of America (NYSE:PKG) 78.05 65.17 0.550 3.38 48 % 42 % -16.50 -15.09 -13.85 -0.43 37.50 53.33
Rock-Tenn Company (RKT) 121.96 123.72 0.641 2.07 31 % 28 % 1.44 2.49 0.49 17.75 83.17 65.48
Sealed Air Corporation (NYSE:SEE) 42.43 51.85 0.130 1.00 24 % 21 % 22.20 22.81 6.37 26.65 0.00 1.67
Silgan Holdings Inc. (NASDAQ:SLGN) 53.60 53.83 0.160 1.19 20 % 18 % 0.43 1.03 -5.34 6.73 6.67 10.48
Sonoco Products Co. (NYSE:SON) 43.70 44.06 0.350 3.18 53 % 48 % 0.82 2.43 -2.94 6.78 9.38 5.00
West Pharmaceutical Services (NYSE:WST) 53.24 58.89 0.110 0.75 24 % 20 % 10.61 11.03 -12.20 12.02 10.00 7.50

Average         2.17 41 % 35 % -0.06 0.89 -7.65 5.32 14.58 21.92

The SPY [S&P 500 EFT] is up 2.10% year to date. - and with unreinvested dividends is up 3.06% year to date.
With the 10 Treasury at 2.41% and the sector average yield on Q2 Dividends at 2.17% - the spread is -24 basis points.
* The change in the dividend is for the last twelve months and not year to date.

Dividend dates are:

ATR : 5-19-15 BBL: 06-14-15 BMS : 05-31-15 GEF: 6-30-15 IP: 06-14-15 MINI: 6-02-15
PKG : 07-14-15 RKT: 05-25-15 SEE : 6-18-15 SLGN: 6-14-15 SON: 06-09-15 WST: 05-03-15

The relationship between CAGR projections and yields: While yields are also influenced by risk, the influence of dividend growth projections can easily be seen.
The following had CAGR projections equal to or over 10%: MINI PKG SEE WST . Their current average yield is 1.48%.
The following had CAGR projections under 10% but over 5%: ATR BLL BMS IP RKT SLGN . Their current average yield is 1.91%.
The following had CAGR projections equal to or under 5.0%: GEF SON . Their current average yield is 3.71%.

Price/Earnings Ratios 6-25
RKT started fiscal 2015 at the beginning of calendar Q4-14


  EPS / Share % EPS Growth Price/EPS 15 EPS Range
Co. 2012 2013 2014 2015 2016 12-13 13-14 14-15 15-16 2014 2015 2016 High Low Range

ATR 2.50 2.79 2.86 2.80 3.13 11.60 2.51 -2.10 11.79 22.48 22.96 20.54 2.97 2.65 11.43%
BLL 2.57 3.28 3.88 3.57 3.99 27.63 18.29 -7.99 11.76 18.70 20.32 18.18 4.00 3.70 8.40%
BMS 1.53 2.28 2.30 2.59 2.81 49.02 0.88 12.61 8.49 19.99 17.75 16.36 2.66 2.44 8.49%
GEF 3.35 2.75 2.36 1.73 2.19 -17.91 -14.18 -26.69 26.59 15.74 21.47 16.96 2.50 2.00 28.90%
IP 1.72 3.16 3.00 3.90 4.28 83.72 -5.06 30.00 9.74 16.12 12.40 11.30 4.30 3.60 17.95%
MINI 0.93 1.08 1.09 1.46 1.88 16.13 0.93 33.94 28.77 39.77 29.69 23.06 1.62 1.49 8.90%
PKG 1.70 3.28 4.66 4.54 5.20 92.94 42.07 -2.58 14.54 13.98 14.35 12.53 5.50 4.89 13.44%
RKT 3.54 7.30 7.52 8.20 9.22 106.21 3.01 9.04 12.44 16.45 15.09 13.42 9.30 7.60 20.73%
SEE 2.20 1.23 1.86 2.17 2.51 -44.09 51.22 16.67 15.67 27.88 23.89 20.66 2.23 2.00 10.60%
SLGN 2.18 2.77 3.17 3.19 3.47 27.06 14.44 0.63 8.78 16.98 16.87 15.51 3.36 3.25 3.45%
SON 2.25 2.30 2.54 2.64 2.90 2.22 10.43 3.94 9.85 17.35 16.69 15.19 2.75 2.60 5.68%
WST 1.36 1.63 1.78 1.80 2.25 19.85 9.20 1.12 25.00 33.08 32.72 26.17 1.90 1.80 5.56%

Average           11.15 5.72 15.28 21.54 20.35 17.49      

Disclosure: I am/we are long PKG, RKT.