Updated 3/6/25
Avery Dennison (NYSE: AVY) is a name you may not think about often, but its products are everywhere. From the labels on grocery store shelves to the RFID tags in your favorite clothing stores, Avery Dennison plays a huge role in branding and packaging across multiple industries.
For long-term investors, AVY has been a steady performer with a strong history of dividend growth. While it may not offer the highest yield in the market, its track record of reliable cash flow and consistent dividend increases makes it a solid option for income-focused investors. Let’s take a closer look at whether this stock fits into a dividend-focused portfolio.
📊 Key Dividend Metrics
💰 Dividend Yield: 1.93% (Forward)
💵 Annual Dividend: $3.52 per share
📈 5-Year Average Dividend Yield: 1.59%
⚖️ Payout Ratio: 39.52%
📆 Next Dividend Date: March 19, 2025
🔄 Dividend Growth Streak: 12+ years
Dividend Overview
Avery Dennison isn’t a high-yield stock, but it makes up for that with steady, long-term dividend growth. With a forward dividend yield of 1.93%, it sits slightly above its historical five-year average. That suggests investors are getting a decent yield relative to past levels.
What makes AVY appealing to dividend investors is its reasonable payout ratio of 39.52%. That means the company retains enough earnings to reinvest in its business while still rewarding shareholders. A lower payout ratio also adds a layer of safety, ensuring that even during economic downturns, the company has room to maintain or grow its dividend.
Another factor worth noting is AVY’s longstanding commitment to increasing its dividend. While it hasn’t quite reached the status of a Dividend Aristocrat, it has a strong 12-year streak of annual increases, with no signs of slowing down.
Dividend Growth and Safety
For investors who focus on long-term income, dividend growth is just as important as the yield itself. Avery Dennison has delivered steady increases over time, and its growth rates over the past decade show why it’s a solid dividend compounder.
Over the last five years, the company’s dividend has grown at an average rate of around 11% per year, and over the past decade, it has expanded at roughly 12% per year. That kind of growth can significantly increase an investor’s income stream over time, especially for those who reinvest dividends.
Another reason for confidence in AVY’s dividend safety is its strong cash flow generation. The company pulled in nearly $938 million in operating cash flow over the past year, with levered free cash flow of about $779 million. That gives it plenty of room to continue raising dividends while also investing in its business.
Even during economic downturns, AVY’s core business tends to remain stable, as demand for labeling and packaging doesn’t disappear entirely. However, because its customers include retail and industrial companies, a major economic slowdown could have an impact on future growth.
Chart Analysis
Looking at Avery Dennison’s price action over the past year, the trend has clearly been downward. The stock peaked around mid-2024, but since then, it’s been stuck in a prolonged downtrend with lower highs and lower lows.
The 50-day moving average (orange line) is well below the 200-day moving average (blue line), confirming that the stock is in a bearish phase. This kind of pattern, often called a “death cross,” signals that sellers have controlled the trend for quite some time. Even with the recent bounce, the price is still struggling to gain meaningful momentum.
One positive sign is that the stock appears to be trying to form a base around the $180-$185 range. Buyers have stepped in a few times at these levels, preventing further downside—for now. However, each rally attempt has been short-lived, with the 50-day moving average acting as a strong resistance level.
Volume activity shows a spike in selling pressure around late January and early February, which aligns with a sharp drop in price. More recently, there’s been a slight uptick in volume on green days, which suggests some buying interest, but nothing strong enough to confirm a reversal just yet.
The Relative Strength Index (RSI) is hovering near 60, meaning the stock isn’t overbought or oversold. This suggests the stock has room to move in either direction, depending on broader market conditions and company-specific catalysts.
The last five candles show a mix of indecision and some selling pressure. The latest attempt to push above resistance was met with sellers stepping in, which is a sign that confidence is still shaky. A clean break above $190 with strong volume could be an early sign that momentum is shifting.
Analyst Ratings
Avery Dennison has recently been the focus of various analyst evaluations, reflecting both optimism and caution. The consensus among 11 analysts is a “Moderate Buy” rating, with an average 12-month price target of approximately $227.15, suggesting a potential upside of about 22% from the current stock price.
📈 Upgrades
🔹 J.P. Morgan upgraded Avery Dennison from Neutral to Overweight, adjusting the price target from $210 to $205. This reflects increased confidence in the company’s ability to drive growth despite broader market volatility. Analysts pointed to resilient cash flows and improving operational efficiency as key reasons for the upgrade.
🔹 Barclays maintained an Overweight rating but revised its price target from $245 to $225. The firm acknowledged strong market positioning and a history of steady dividend growth, but the price adjustment factored in recent cost pressures and potential macroeconomic headwinds affecting Avery Dennison’s industry.
📉 Downgrades
🔻 UBS maintained a Neutral rating while lowering the price target from $235 to $207. The downgrade was primarily due to concerns about declining margins and slowing demand in key segments. Analysts also noted ongoing input cost volatility, which could put pressure on profitability in the coming quarters.
🔻 Citigroup reiterated a Neutral stance but reduced the price target from $228 to $202. The firm cited fluctuations in raw material costs and potential headwinds in global supply chains as reasons for the downgrade. Analysts also expressed caution about rising debt levels and interest rate impacts on borrowing costs.
These mixed analyst perspectives highlight both the strengths and risks associated with Avery Dennison. While the company maintains a solid position in its industry, ongoing economic pressures and cost-related challenges have led to some tempered expectations from analysts.
Earnings Report Summary
Avery Dennison wrapped up the fourth quarter of 2024 with solid numbers, showing steady growth despite some industry challenges. The company reported $2.2 billion in revenue, marking a 3.6% increase compared to the same time last year. For the full year, revenue came in at $8.8 billion, up nearly 5% from 2023.
Earnings per share (EPS) also saw a nice boost. The company reported $2.16 EPS for the quarter, while adjusted EPS came in at $2.38, reflecting a 10% year-over-year increase. For the full year, EPS hit $8.73, and the adjusted figure reached $9.43, up 19% from the prior year.
Looking at Avery Dennison’s different business segments, the Label and Graphic Materials (LGM) division had a 3.5% sales increase, thanks to strong demand for labeling products. The Retail Branding and Information Solutions (RBIS) segment grew 4%, largely driven by more companies adopting RFID tracking solutions. Meanwhile, the Industrial and Healthcare Materials (IHM) segment was up 2.5%, mainly due to growth in the medical sector.
Margins improved as well. The company’s gross profit margin hit 34%, compared to 32.5% last year, thanks to better cost efficiencies and a favorable product mix. Operating expenses held steady at $450 million, which suggests Avery Dennison is doing a good job managing costs while growing revenue.
On the balance sheet side, cash reserves climbed to $329.1 million, a solid jump from $215 million in 2023. Debt remains a factor, with $3.2 billion in total debt, but the debt-to-equity ratio improved slightly from last year, which is a good sign.
Looking ahead, the company is optimistic about 2025, setting guidance for EPS between $9.55 and $9.95, with adjusted EPS expected to land between $9.80 and $10.20. If those projections hold, it would mark another year of steady earnings growth.
Overall, Avery Dennison’s latest report shows a company that’s holding its ground, maintaining profitability, and continuing to expand in key areas, even in a mixed economic environment.
Financial Health and Stability
One of the biggest indicators of a dividend stock’s sustainability is the strength of its balance sheet. Here’s how Avery Dennison stacks up financially:
✔️ Revenue: $8.76 billion (3.6% YoY growth)
✔️ Net Income: $704.9 million (21.6% YoY growth)
✔️ Return on Equity (ROE): 31.75%
✔️ Total Debt: $3.38 billion
✔️ Debt-to-Equity Ratio: 146.08%
AVY’s return on equity (31.75%) is impressive, showing that management is using shareholder capital efficiently. However, one thing to watch is the company’s debt levels, which are relatively high with a 146% debt-to-equity ratio. While the company has managed its leverage well, higher interest rates could make borrowing more expensive over time.
Despite this, Avery Dennison’s cash flow remains strong, and it has shown an ability to service its debt while still growing dividends. Investors who prefer lower-debt dividend stocks might want to keep an eye on this metric, but for now, AVY’s financial position appears solid.
Valuation and Stock Performance
🔹 Current Price: $182.82
🔹 52-Week Range: $178.72 – $233.48
🔹 Trailing P/E: 20.94
🔹 Forward P/E: 18.28
🔹 PEG Ratio: 2.08
Avery Dennison’s stock has had a rough year, currently trading about 15% below its 52-week high. Some of this is due to broader market trends, while some is linked to company-specific challenges like margin pressures and slowing growth in certain segments.
The stock trades at a forward P/E of 18.28, which isn’t too expensive but also not a deep discount. Investors who focus on valuation might want to wait for a better entry point, but long-term dividend investors will likely focus more on its income potential than short-term price movements.
From a technical standpoint, the stock is trading below both its 50-day ($186.46) and 200-day ($207.42) moving averages, which suggests some near-term weakness. That could present an opportunity for those looking to buy at a lower price.
Risks and Considerations
Every stock comes with risks, and while AVY is a stable dividend payer, there are a few things to keep in mind.
1️⃣ Economic Sensitivity – Avery Dennison’s customers include retailers and industrial companies, which can reduce spending in downturns. While the company’s products are essential, demand can still fluctuate.
2️⃣ Debt Levels – The debt-to-equity ratio of 146% is something to watch. Rising interest rates could make it more expensive for the company to manage its debt.
3️⃣ Margin Pressures – The cost of raw materials like adhesives and specialty chemicals can impact profitability. While AVY has pricing power, inflationary pressures can still weigh on margins.
4️⃣ Global Exposure – With a large international footprint, AVY faces currency risks and geopolitical uncertainties. A stronger U.S. dollar could reduce overseas earnings.
5️⃣ Stock Volatility – While AVY’s beta of 0.86 suggests lower volatility than the broader market, it has experienced 15%+ pullbacks in the past year. Dividend investors should be prepared for some price swings.
Final Thoughts
Avery Dennison isn’t the highest-yielding dividend stock, but it offers strong, steady dividend growth backed by solid fundamentals. With a 12-year streak of dividend increases, a payout ratio under 40%, and a history of double-digit dividend growth, it’s a company that income investors can rely on.
The stock has faced some challenges recently, and with its debt levels and economic sensitivity, it’s not without risks. However, its strong cash flow, history of shareholder returns, and market leadership make it a compelling option for those seeking a growing dividend over time.
For patient dividend investors, AVY remains a company worth watching—especially if its valuation becomes more attractive in the coming months.
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