DS Smith (LSE: SMDS) is a share I hold and anticipate never selling. If you’re either unfamiliar with the packaging giant or unconvinced by its investment case though, let me roll out a few numbers which I think make it such a compelling buy:
- A 5.6% forward dividend yield, a reading which smashes the FTSE 100 corresponding average of 4.5% to smithereens.
- A bargain-basement prospective P/E ratio of 8.2 times, a reading which fails to reflect DS Smith’s long record of chubby profits growth.
- Recent predictions from Zion Market Research that the global fast-moving consumer goods (FMCG) packaging market will be worth a staggering $657.3bn by the end of 2024, growing at a compound annual growth rate of 4.2% and soaring from $492.8bn in 2017.
Investor sentiment towards DS Smith may still be flat on the expectation of increased packaging supply from Chinese producers, but I believe the company’s 40%-plus share price fall over the past year represents a terrific buying opportunity.
I’ve long lauded DS Smith’s expansion programme to bolster its global and operational reach, moves designed to improve its relationships with the world’s largest FMCG companies. And in recent years, it’s made potentially game-changing strides in both respects, first by entering the US marketplace in 2017, and in recent months by taking over industry giant Europac and its operations spanning France, Spain and Portugal.
What’s more, DS Smith has been taking steps to improve its position in the e-commerce packaging market through both M&A activity and organic investment, measures which put it in the box seat to ride the global internet shopping boom.
Another hot buy
I’m not worried about DS Smith for a second, then. I’m disappointed by its share price run over the past year, but I’m convinced that, despite those fears over rising market supply and future sales growth, it still has the tools to keep its mantle as a deliverer of continuous and considerable earnings and dividend expansion year after year.
I’d also say that Highland Gold Mining (LSE: HGM) is another share to buy today and stash away for the years to come. Gold prices may go up and down, but as insurance for your investment portfolio when the global economy struggles and markets go sideways, having exposure to safe-haven precious metals can help you to offset losses.
Not that I’m expecting bullion values to fall, mind. The only way is up, in my opinion! Consider the rising tension between the US and China over trade tariffs and the prospect of similar bickering between Washington and European capitals in the months ahead. Think about Brexit, sharp economic cooling in China and Europe, the growing political struggle in Italy, threats of military action between the US and Iran…
It’s no wonder City analysts are expecting earnings at Highland Gold, like DS Smith, to surge by double-digit percentages in the current fiscal year, and for dividends to keep rising too. As a consequence, the dirt digger yields a splendid 4.1%, a figure which, like its low forward P/E ratio of 11.5 times, I think makes it a brilliant buy right now.
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Royston Wild owns shares of DS Smith. The Motley Fool UK has recommended DS Smith. 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.