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Is it time you checked out FTSE 100 firm Mondi’s growing 3.5% dividend yield?

FTSE 100 paper and packaging company Mondi (LSE: MNDI) has a good record of generally rising revenue, earnings and operating cash flow supporting steady growth in the dividend.

Today’s full-year results revealed further strong progress. Revenue rose 5% compared to the year-ago figure and basic underlying earnings per share shot up 27%. The directors seem more than happy with the outlook because they pushed up the full-year dividend by a whopping 23%. I wish all my investments made dividend progress like that!

Robust operational performance

The report trumpets “robust” operational performance and “strong” control of costs during the year, which seems to account for the decent earnings advance. Although the company spent €424m on acquisitions during the period too. On top of that, the firm is ploughing money back into a capital investment project pipeline designed to deliver growth in the future.

Mondi operates in central Europe, Russia, North America and South Africa. And I like the way its business is integrated “across the packaging and paper value chain.” Indeed, the company manages forests, produces pulp, paper and plastic films, and makes industrial and consumer packaging. My guess is that the set-up gives the firm more control over the entire process than it would have had if it dealt only with external suppliers.

Chief executive Peter Oswald explained in the report there was good demand in 2018 for the fibre packaging businesses. Higher average selling prices also helped profits along with a contribution from recent acquisitions. He said productivity gains and cost containment offset some of the pressure from inflation, which drove up costs.

It seems to me that Mondi is one of those commoditised types of enterprise that has to constantly invest in operations and bear down on costs in order to stay ahead of the curve and remain profitable. Nevertheless, demand for its services seems steady and cash-generative, which along with the success in expanding operations keeps the dividend growing.

Simplifying the corporate structure

The directors announced in November plans to ditch the complicated dual-listing structure. That’s a trend we’ve been seeing across the stock market recently among those companies that had previously been clinging to that old-fashioned dual-listing idea. Mondi believes the move will “streamline” cash and dividend flows, enhance its strategic flexibility, increase transparency and “remove the complexity associated with the current structure.” I think that’s right. Simplification in business is almost always a good idea, in my view.

Looking forward, the directors acknowledge the existence of macro-economic uncertainties. But they are “confident” the structural growth drivers in the packaging sectors in which Mondi operates, and the firm’s robust business model, will see the company through any wobbles in the economic environment.

Today’s share price close to 1,770p throws up a price-to-earnings ratio just over 11 and a dividend yield around 3.5%. I think the share looks attractive given the steady growth of the underlying business, which reflects in the growing dividend.

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Kevin Godbold has no position in any share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.