Good investing is a game of patience. While the less experienced crave only for High Yield Dividend stocks, astute investors remain patient when investing for passive income. They hunt for an opportunity to buy a growth stock with a good Dividend Yield. Such a strategy can have the potential of enabling better returns over a longer time period. One of such Dividend Paying Stocks with growth prospects is
Amcor plc (ASX: AMC)
For the nine months ended on 31 March 2024, the company achieved robust free cash flow (FCF) of $115 million, which is approximately $100 million higher than the $14 million recorded in the same period last year. This strong performance is in line with our expectations and is primarily due to improved working capital management. Net debt as of March 31, 2024, was $6,729 million, with a leverage ratio of 3.4 times net debt to adjusted trailing twelve-month EBITDA. This level of leverage is consistent with forecasts, and it is anticipated that it will decrease to approximately three times by June 30, 2024, further aligning with our expectations.
Despite a decline in overall volumes compared to the previous year, Amcor's March quarter performance was better than expected, with significant improvement from the previous quarter. Growth was achieved across various categories and regions, driven by volume gains, cost-saving initiatives, and flexible cost management.
Amcor's organic growth is propelled by strong performance in emerging markets, with over $3 billion in sales across 25 countries, and a focus on high-value categories like healthcare, protein, and hot-fill beverages. The company consistently invests ~$100 million annually in R&D to drive innovation. Historic mid-single-digit volume growth in emerging markets and over $4 billion in sales from premium coffee and pet food illustrate successful mix improvement and margin expansion.
Amcor's share repurchases and capital return strategy reveal its financial health and commitment to shareholders. By spending $30 million on repurchasing shares and returning a total of $570 million through dividends and buybacks, Amcor shows a balanced approach to distributing value. The relatively small portion spent on repurchases compared to dividends suggests a focus on providing consistent income to investors while also investing in its stock, potentially enhancing shareholder value and confidence in the company's future.
Amcor’s return on equity (ROE) stands at 25.6%, significantly exceeding the sector average of 10.4% and the market average of 8.3%. The return on capital employed (ROCE) is also robust at 30.6%, well above the sector average of 12.3% and the market average of 3.1%.
AMC is among ASX Dividend Stocks having declared a quarterly cash dividend of $0.125 per share, representing a slight increase from the $0.1225 per share paid in the same quarter last year. The incremental rise in the dividend amount indicates improved financial performance or a more stable cash flow situation compared to the previous year.
Based on the forecasted cash flows, the dividend outlook for the upcoming years shows a pattern of steady returns. This gradual rise in dividend payouts suggests a positive trajectory for the company’s cash flow and potentially increased investor returns. For 2024, investors can expect a total of $0.56 in dividends. This trend continues into 2025, with a slight increase to $0.59 in annual dividends. The forecast for 2026 indicates a further increase, with total dividends expected to reach $0.79, spread across four payments throughout the year.
According to analysts' projections, Amcor plc is poised for significant financial growth. Revenue is expected to increase to $3,094 million by FY25 and further to $3,224 million by FY26. The company's EBIT is projected to reach $1,669 million by FY26, with EPS anticipated at $0.74 per share. Free cash flow (FCF) is forecasted to grow to $1,059 million by FY25.
Over the past decade, Amcor plc has consistently achieved an average growth rate of 8% in adjusted earnings per share (EPS). Amcor plc’s focus on expanding its designed-to-be-recycled and recycle-ready packaging solutions offers significant benefits.
With over 80% of its global portfolio now featuring recyclable options, Amcor supports customers in addressing the growing consumer demand for sustainable packaging. The company aims to increase the use of recycled materials to 30% by 2030. Strategic partnerships with ExxonMobil and an investment in Licella will facilitate access to high-quality recycled materials, suitable for healthcare and food-grade applications. These initiatives not only align with regulatory trends and strengthen Amcor’s market leadership but also advance a circular economy by reducing dependence on virgin materials and enhancing resource efficiency.
Source: Company’s Report
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