08-05-2025
Sonoco Products (NYSE:SON) Is Paying Out A Larger Dividend Than Last Year
Sonoco Products Company (NYSE:SON) has announced that it will be increasing its periodic dividend on the 10th of June to $0.53, which will be 1.9% higher than last year's comparable payment amount of $0.52. This will take the dividend yield to an attractive 4.7%, providing a nice boost to shareholder returns.
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A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the company was paying out 252% of what it was earning. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.
Analysts expect a massive rise in earnings per share in the next year. Assuming the dividend continues along recent trends, we estimate that the payout ratio could reach 36%, which is in a comfortable range for us.
See our latest analysis for Sonoco Products
The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $1.28 in 2015, and the most recent fiscal year payment was $2.08. This implies that the company grew its distributions at a yearly rate of about 5.0% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. Sonoco Products' EPS has fallen by approximately 23% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would probably look elsewhere for an income investment.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 4 warning signs for Sonoco Products (2 are concerning!) that you should be aware of before investing. Is Sonoco Products not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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