Packaging Corporation of America (NYSE:PKG) Will Pay A Dividend Of $1.25

Packaging Corporation of America (NYSE:PKG) will pay a dividend of $1.25 on the 15th of July. This means the dividend yield will be fairly typical at 2.8%.

View our latest analysis for Packaging Corporation of America

Packaging Corporation of America's Earnings Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. The last dividend was quite easily covered by Packaging Corporation of America's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

The next year is set to see EPS grow by 29.8%. If the dividend continues on this path, the payout ratio could be 53% by next year, which we think can be pretty sustainable going forward.

Packaging Corporation of America Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the dividend has gone from $1.60 total annually to $5.00. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. However, Packaging Corporation of America's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Our Thoughts On Packaging Corporation of America's Dividend

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for Packaging Corporation of America that investors should take into consideration. Is Packaging Corporation of America not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.