Stock of the week: DS Smith
FTSE 100 packaging company DS Smith reassured investors this week via a positive trading update which acknowledged good like-for-like volume growth with progress being made in all geographic regions. The group’s CEO commented on how pleased he was with the momentum year-to-date ‘in a period where the group also announced a significant acquisition’.
The acquisition referred to came in June, when DS Smith announced a €1.9bn takeover of Spanish rival Europac, to be partly funded via a £1bn rights issue, as another way to strengthen its market share in paper and packaging across Western Europe. At the same time the company announced a review of its plastics business, and it acknowledged this week that progress had been positive. These steps would indicate to investors that the group is taking steps to grow the wider business.
The shares have responded positively to this year’s news and at the minute are at all-time highs, providing investors with an attractive entry point. Interested investors may also want to note that dividend payments have increased substantially in recent years and the prospective yield now stands at 3.6%.
Due to its record of growth, good history on making and integrating acquisitions, cost-cutting plan and healthy dividend growth, we continue to recommend DS Smith as a ‘buy’ for investors seeking a mixture of income and growth but also willing to accept a medium-to-high level of risk.