Many times the “best of breed” market leaders can be good long-term winners for investment returns. They have growing established businesses with highly experienced management teams. One of these companies is Amcor Limited (ASX: AMC), the leading packaging company in Australia.
It de-merged from Orora Ltd (ASX: ORA), a smaller Australian packaging producer that also operates a packaging distribution business in North America, in December 2013. However, it is still on the road of expansion overseas.
Here are five reasons why Amcor could be a steady earner for your portfolio over the years.
1) Market leader in packaging
The $12.7 billion company is the leading maker of packaging for food, household items, beverages, tobacco products and medical products. Due to the daily packaging needs of all kinds of companies, the products are always in demand.
This is the type of company that investor Warren Buffett would love because of the constant need to replace the product sold, like disposable razors.
2) Share price growth and dividend
In the past 12 months its share price is up about 18%, beating the 11% rise of the S&P ASX All Ordinaries Index (ASX: ^AORD). It set a new all-time high of $10.89 in February and is working its way back up to that price. Currently it’s $10.66 and offers a dividend yield of 3.8% unfranked.
3) History of steady earnings growth
Since 2007, it has raised underlying net profit every year and dividends have been stable. Over the next year or two some analysts are forecasting earnings and dividends to rise by about 10% annually.
4) Asian expansion
Over the last year the company has made several acquisitions in Asia to expand its footprint in that growing economic market. With three of the world’s top five most populated countries in the region, there is great potential for long-term growth.
5) Improving returns performance
Not only is it growing revenue and earnings, but financial performance is improving such as a higher return on equity and operating margins. It is able to squeeze more profit out of the operations because of its large scale and efficient management.
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*Extreme Opportunities returns as of June 5th 2020
Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned.
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