In this article, I’m discussing DS Smith (LSE: SMDS), a stock that I’ve bought in the belief it will protect me from poverty once I retire. I’m not concerned about the pitiful size of the State Pension. I’ve loaded up my shares portfolio with great companies from the FTSE 100 to help me build a chubby nest egg for retirement, and this blue-chip share is one of my favourites.
More great news
It didn’t bother me that the market’s attitude towards the packaging specialist continued to sour even after I bought in during the final few months of 2018. As someone who intends to keep the stock (like the rest of my holdings) for a minimum of five years, I’m confident fears over possible oversupply in the containerboard market were excessive and that sentiment towards the Footsie firm would recover.
DS Smith has indeed regained some of this ground and was last dealing at levels not seen since early November. A perky financial update this week has helped, of course. The business declared trading during the past four months has remained “strong,” underpinned by “good corrugated box volume growth with continued market share gains driven by the quality of our offering to large and e-commerce customers and our FMCG -weighted customer base.”
On top of this, the boxbuilder vindicated its decision to enter the US with the acquisition of Interstate Resources in 2017. DS Smith said it continues to “perform well” in this exciting growth market, describing the “strong margins and returns ahead of our acquisition case” and reinforcing my belief that its move into the States will provide exceptional profits opportunities in the years to come.
5%+ dividend yields!
The release of yet another bubbly trading update is hardly a surprise, not to me at least. Steps to bolster both its geographical footprint and its product ranges, with a rising emphasis on providing top-quality sustainable packaging, continues to pay off handsomely. Its goods are beloved by FCMG and online retailers across the globe and this is helping to insulate it against the threat of rising competition from China and elsewhere.
This is not the only good news to hit DS Smith shareholders in recent days. The just-announced $585m sale of its Plastics division to Olympus Partners boosts the company’s green credentials still further and gives its balance sheet a significant shot in the arm. That gives the firm scope for additional investment in its core operations as well as licence to keep rewarding its shareholders with chubby dividend hikes.
This view is certainly subscribed to by City brokers, who expect that last year’s 14.7p per share total payout will sail to 16.4p in the year to April 2019, and again to 17.7p next year. Such projections yield a smashing 4.7% and 5.1%, respectively.
City analysts don’t expect DS Smith’s long record of earnings growth to cease any time soon. And neither do I. Rather, I reckon the packaging star will deliver some considerable shareholder returns in the years ahead. And right now, given its rock-bottom valuation (a forward P/E multiple of 9.8 times, to be exact), it’s a top Footsie income share to buy into today and one that could make you very rich by the time you come to retire.
