Energy and Materials

It is easy to fall into the trap of thinking you recognize a business by its name. For example, when most people hear the word Sonoco, they are thinking about an energy company that is called Sunoco. These businesses are vastly different. I like SON, but I would not buy shares of SUN.

SUN is Sunoco LP., an energy company without a rising dividend and a payout ratio of 93.70%. I wouldn’t buy this investment. SON, on the other hand, is Sonoco Products Company, which is a materials company focused on packaging. It has been in business since 1899.

Sonoco Packaging Solutions for multiple industries

Reasons to like SON.

There are several reasons I own shares of this materials company. The dividend yield is a respectable 2.75%. The annual payout per share is $1.80 and the payout ratio is a very solid 51.13%. Just as important, the 5 Year Growth Rate is better than inflation at 4.44% and it has been growing the dividend for 11 Years. The dividend was recently increased from $0.43 per share to $0.45/share (quarterly dividend), which is a 4.7% increase from prior dividend of $0.43. Forward yield 2.77%. The dividend is payable June 10; for shareholders of record May 10; ex-div May 7.

What is Sonoco’s Business?

Sonoco Products Company manufactures and sells industrial and consumer packaging products in North and South America, Europe, Australia, and Asia. The company operates through four segments: Consumer Packaging, Display and Packaging, Paper and Industrial Converted Products, and Protective Solutions. The Consumer Packaging segment provides paper and thermoformed plastic round and shaped rigid containers and trays; extruded and injection-molded plastic products; printed flexible packaging products; brand artwork management; and metal and peelable membrane ends and closures. The Display and Packaging segment offers temporary and semi-permanent point-of-purchase displays; supply chain management services comprising contract packing, fulfillment, and scalable service centers; retail packaging, including printed backer cards, thermoformed blisters, and heat-sealing equipment; and paper amenities, such as coasters and glass covers. The Paper and Industrial Converted Products segment provides paperboard tubes, cones, and cores; fiber-based construction tubes; wooden, metal, and composite wire and cable reels and spools; and recycled paperboard, corrugating medium, recovered paper, and material recycling services. The Protective Solutions segment provides custom-engineered, paperboard-based, and molded foam protective packaging and components; and temperature-assured packaging products. The company sells its products in various markets, which include paper, textile, film, food, chemical, packaging, construction, and wire and cable. Sonoco Products Company was founded in 1899 and is headquartered in Hartsville, South Carolina.

Full Disclosure

Cindie and I own 200 shares of SON in my traditional IRA as a long-term investment.