Who said ‘buy and hold’ is dead?
SmallCapPower | April 20, 2016: Today we take a look at some Canadian companies that have rewarded patient investors that have held its shares over the past decade. Examining what has made these companies successful will hopefully help one find the next big winning stock for their portfolio.
CCL Industries Inc. (TSE:CCL.B): 759.2% Stock Price Appreciation
For many successful companies boring can be beautiful. If this is the case, then there’s a reason why some long-term investors have been attracted to CCL Industries.
The Company is likely the world’s largest manufacturer of labels, packaging, and containers. Take a look at almost anything you purchased for personal use recently, from that plastic mustard bottle in your kitchen, to the shampoo in your shower, to the weed killer that you use on your lawn, and chances are CCL Industries had a hand in the package and the label that caught your eye while you were in the store.
CCL has been successful in helping consolidate a highly-fragmented market, without indulging in excessive debt or shareholder dilution. In fact, the Company has just 32.7 million Class B common shares outstanding.
One of its most significant acquisitions in recent years was the purchase of Avery from Avery Dennison Corp. in 2013 for US$500-million in cash. If you ever attended an event that required a name tag or badge then it likely was printed by Avery. CCL cut costs quickly and added new digital products, with Avery now accounting for 25% of CCL’s total sales with its Return on Sales increasing from 16.4% in 2014 to 19.5% in 2015.
In 2015 alone the Company completed six acquisitions, most notably Worldmark.
On March 2, 2016, CCL announced what could turn out to be another game changer in the pending purchase of Checkpoint Systems, Inc. (NYSE:CKP) for about US$556 million in cash. Checkpoint produces radio frequency technology tags on clothing and other merchandise that helps retailers manage inventory and loss prevention. CCL expects synergy savings of up to $40 million annually and the deal will give the Company access to a long-standing, blue-chip customer base of top global retailers and apparel brands. Checkpoint generated net revenue of approximately $820 million and Adjusted EBITDA of $83 million in 2015.
CCL’s Return on Equity, meanwhile, has grown steadily from 9.5% in 2010 to a record 21.1% in 2015, while producing double-digit earnings per share growth during the past six years. All of which has allowed CCL to regularly raise its annual dividend from $0.40 in 2005 to $2.00 in 2016 – a 400% increase over this time. And, with a dividend payout of 17% this Company has plenty of room to raise, making it appealing to income investors going forward.
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