The market responded to bright trading details from Mondi (LSE: MNDI) by sending the share price 4% higher in Friday business.
The packaging manufacturer has seen its share price endure no little choppiness over the past six months or so as investors have fretted over rising cost headwinds.
However, the FTSE 100 business is passing these expenses over to its customers with increasing success — indeed, chief executive Peter Oswald commented today that he had witnessed “strong upward momentum in pricing across our key product segments in Packaging Paper and Fibre Packaging over the course of 2017 and into early 2018.”
As a consequence, group revenues rose 7% in 2017 to €7.1bn, a result that pushed pre-tax profit 5% higher to €887m. These bubbly results prompted Mondi to pay a 100 euro-cent-per-share special dividend for last year on top of a 62-cent ordinary payment.
More to come
City analysts are expecting earnings at Mondi to rise an extra 7% and 4% in 2018 and 2019 respectively. And I believe the supply shortage in Mondi’s key markets should keep profits pounding higher for much longer.
There’s much for dividend investors to shout about too, with predicted total dividends of 68.4 cents this year and 71.2 cents for next year yielding a juicy 3.2% and 3.3%. Dividend coverage, meanwhile, clocks in at a robust 2.2 times-2.3 times through to the end of next year.
A mega-low forward P/E ratio of 13.4 times puts the cherry on top of the cake.
Clothing colossus
Footsie investors seeking shares to buy now and forget about in the years ahead should give Associated British Foods (LSE: ABF) more than just a quick glance.
The splendid progress the company’s Primark division is making is well documented and last year sales here jumped 7% during the 24 weeks to March 3 (or 9% on a constant currency basis). Whil like-for-like sales dipped 1% during the six months, this reflected the impact of unseasonable weather in October and performance here has improved since. It estimates that like-for-like sales edged 1% higher in latter 16 weeks of the period.
Demand for Primark’s cheap fashion continues to tear higher in the core UK marketplace, and sales here are likely to continue surging as cash-strapped shoppers switch down from its higher-priced high street rivals. Meanwhile, expansion measures in Europe and now on the other side of the Atlantic should provide the groundwork for sustained revenues rises in the years ahead.
In the meantime City analysts are forecasting earnings expansion of 7% in the year to September and 9% next year. But bright profits growth is not the only reason to get excited as, like at Mondi, Associated British Foods’ dividends are predicted to keep growing at a terrific rate.
Last year’s 41p per share dividend is expected to stomp to 44.4p this year and to 48.6p in fiscal 2019, figures that create handy-if-not-spectacular yields of 1.7% and 1.8% respectively. And share pickers can take confidence from the fact that dividends are predicted to cover anticipated earnings more than 3 times over through to the close of next year.
The share price has lost 20% of its value during the past four months as retail indicators in the UK have floundered. This represents a fresh buying opportunity in my opinion, even if the firm still deals on a slightly-lofty forward P/E ratio of 17.8 times.
