Tuesday, January 31, 2012

Sonoco Products (SON) 2012 Review

Sonoco Products Co (SON) is a leading producer of paper-based tubes and cores, flexible packaging, rigid plastic containers, cylinder paperboard, composite cans, protective partitions, wire and cable reels and point of purchase displays.

The company has grown profits and dividends at a 5-6% pace over the last five years earning a 13-15% return on equity. The company should continue to grow as a result of:

(1) new product innovation. SON has raised the amount of capital spending dedicated to new product opportunities,

(2) increased focus of consumer oriented businesses,

(3) its ongoing restructuring efforts to reduce costs and improve productivity.


(1) rising costs of raw materials,

(2) its customer base is highly concentrated,

(3) a major segment of its business is dependent on the housing industry.

Sonoco is rated A by Value Line, has a 31% debt to equity ratio, has raised its dividend for 27 consecutive years and its stock yields 3.7%.

Statistical Summary

Stock Yield Dividend Growth Rate Payout Ratio # Increases Since 2002
SON 3.7% 8% 45% 10
IND 1.7 7 25 NA

Debt/Equity ROE EPS Down Since 2002 Net Margin Value Line Rating
SON 31% 15% 3 6% A
IND 80 17 NA 6 NA


Note: SON stock made good progress off the March 2009 lows, surpassing the down trend off its July 2007 high (red line) and the November 2008 trading high (green line). Long term, the stock is in an up trend; the straight blue line is the lower boundary. In early 2011, it broke the up trend off its March low and reset to a trading range (purple lines). It also recently broke a short term up trend off its August 2011 low. The wiggly blue line is on balance volume. The High Yield Portfolio owns a 50% position in SON. Shares would be Added at $21; the lower boundary of its Sell Half Range is $42.


Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.