Updated 3/26
Sonoco Products Company has been around for well over a century, and during that time, it’s established itself as a quiet but steady player in the global packaging space. Headquartered in South Carolina, Sonoco manufactures a wide array of consumer and industrial packaging solutions, ranging from food containers to protective packaging for shipping goods. It’s a backbone business—one that tends to hum along in both good times and bad, albeit with its fair share of challenges.
While the company’s recent stock performance has been less than stellar, it continues to appeal to income-oriented investors thanks to its attractive dividend yield and history of regular payments. And with the shares trading near their 52-week low, many are starting to take another look at this legacy name through a dividend lens.
Recent Events
Sonoco has been facing a rough patch, and its most recent financials reflect that. For the quarter ending December 2024, revenue fell 16.7% year-over-year, bringing total sales for the trailing twelve months to $5.31 billion. While this decline in top-line growth is concerning, the company still generated nearly $834 million in operating cash flow.
Profit margins remain tight. The profit margin sits at 3.09%, while operating margin is just 4.33%. That tells us that while Sonoco is still profitable, there isn’t much room for error, especially with inflation and supply chain pressures still in the mix.
On the debt front, things are a bit more strained. Total debt now stands at $7.35 billion, against just $431 million in cash. The debt-to-equity ratio has ballooned to 321%, and the current ratio of 0.79 suggests near-term liquidity could become a concern if cash flow stumbles.
The company’s diluted EPS has dipped to just $0.68 for the trailing twelve months, which is a sharp contrast to past years where it routinely cleared $2 or more. That steep earnings drop is part of what’s keeping investor sentiment subdued.
Key Dividend Metrics
📈 Forward Dividend Yield: 4.41%
💵 Annual Dividend: $2.08
📆 Next Dividend Date: March 10, 2025
📊 Payout Ratio: 304.41%
🕰️ 5-Year Average Yield: 3.32%
⬇️ 52-Week Stock Performance: -18.52%
📉 Beta: 0.60
That payout ratio jumps off the page. At over 300%, it suggests the dividend is currently being funded by more than just net income—either cash reserves or debt is playing a role here. This isn’t sustainable over the long haul, but Sonoco has weathered storms before and still paid out.
Dividend Overview
One thing Sonoco’s known for is paying its dividend—through thick and thin. And right now, the 4.41% forward yield makes it one of the more appealing income plays in the packaging space, at least on the surface.
The company’s trailing and forward dividends are nearly identical, indicating stability, if not growth. But the story gets more complicated when we factor in earnings. The high payout ratio tells us the current dividend is outpacing earnings by a wide margin. That’s not a dealbreaker in the short term, especially for a company with consistent operating cash flow, but it does raise questions about how long this can last if profitability doesn’t rebound.
Dividend Growth and Safety
Sonoco has historically been a reliable dividend payer, often increasing the dividend at a slow but steady clip. Over the past five years, the average yield has been 3.32%, making the current 4.41% figure look more appealing than usual.
But the big issue now is coverage. The payout ratio—north of 300%—tells us the dividend is not being supported by earnings. That’s a yellow flag. However, free cash flow paints a more forgiving picture. With nearly $242 million in levered free cash flow over the last year, Sonoco still has some room to maintain the dividend in the near term.
What investors need to see going forward is an improvement in earnings. If the company can stabilize its margins and return to more normalized EPS, the dividend becomes much safer. If not, pressure to revise the payout will build.
Chart Analysis
Price Action and Trend Behavior
Sonoco’s chart tells a clear story of a prolonged downtrend that’s been in place for nearly a year. After peaking around late April to early May, the price began a steady descent, breaking below both the 50-day and 200-day moving averages. Since then, each rally attempt has made lower highs, and support has gradually eroded.
The 50-day moving average (orange line) has stayed below the 200-day moving average (blue line) since late summer, confirming that the stock has remained in a bearish phase. The two lines continue to diverge, showing no signs of a near-term reversal in trend. Price attempted to test the 50-day in the most recent session but failed to reclaim it, closing just below at 46.64.
Volume Activity
Volume has been mostly muted with occasional spikes, especially during sharp drops or brief rallies. Notably, there were large red volume bars in early July and again in late October, suggesting heavy selling pressure on those days. More recently, volume has picked up during a few green days in March, but it hasn’t been enough to decisively shift the overall direction. These recent upticks in volume on green candles show some buyers are stepping in, though not with the kind of conviction that usually signals a trend reversal.
RSI and Momentum
The relative strength index (RSI) has been hovering in the middle range between 30 and 50, which is generally considered neutral to weak. It has not entered oversold territory for an extended time, but it’s also far from signaling strength. The RSI dipped below 30 around late June and briefly again in early March, but each time it bounced modestly without follow-through. That speaks to a lack of strong bullish momentum.
Latest Five Candles
Looking at the most recent five trading sessions, the candles suggest indecision with a slight lean toward buying pressure. There have been multiple lower wicks, indicating that while sellers have pushed prices down intraday, buyers are stepping in to bring them back up before the close. However, the overall size of the candles is small, pointing to a lack of strong conviction from either side. The last candle tried to push higher, hitting a daily high of 47.17, but couldn’t hold that level and closed near the low end of the range.
These price patterns, when viewed alongside the downward sloping moving averages and RSI, continue to reflect a weak environment with short bursts of interest that have yet to change the overall direction.
Analyst Ratings
📉 Sonoco Products Company has seen mixed reactions from analysts in recent months, with some expressing caution while others remain optimistic about its long-term prospects.
🔻 In February 2025, Wells Fargo lowered its price target on the stock from $50.00 to $48.00 and reiterated an “underweight” rating. The downgrade stemmed from concerns about Sonoco’s rising debt load and slowing revenue momentum, which have put pressure on margins and cast some doubt on the near-term outlook.
🔄 At the same time, Truist Financial took a more measured tone. While they trimmed their price target from $68.00 to $60.00, they maintained a “buy” rating. Their outlook suggests confidence in the company’s ability to recover and stabilize, especially if it can rein in costs and improve cash flow. This stance leans on the assumption that Sonoco’s fundamentals remain intact despite recent headwinds.
📈 Bank of America, on the other hand, offered a notably bullish take. Back in January 2025, they bumped their target up from $66.00 to $71.00, pointing to expectations of a rebound in operational performance and better earnings quality in the coming quarters.
🎯 As it stands, the average analyst price target for Sonoco is around $58.50. That’s a solid premium over the current trading level and implies an upside of roughly 24%. Price targets range from a low of $48.00 to a high of $71.00, reflecting a wide spectrum of expectations depending on how well the company executes through the rest of the year.
Overall, while the sentiment isn’t overwhelmingly bullish, there’s clearly a segment of analysts who believe Sonoco’s current valuation may be overly pessimistic given its long-term potential.
Earning Report Summary
Mixed Quarter with Some Bright Spots
Sonoco Products wrapped up 2024 with a bit of a mixed bag in its latest earnings report. The company did post a slight uptick in sales, thanks in part to the recent acquisition of Eviosys, a major European food can manufacturer. That deal closed in early December and gave a nice late-quarter boost. Overall net sales came in at $1.4 billion for the fourth quarter, up about 2% from the year before.
But it wasn’t all smooth sailing. The company also completed the sale of its Protective Solutions business and restructured some of its recycling operations. These changes took a bit of wind out of the sales growth, essentially balancing out the gains from Eviosys.
Profit Hit by Acquisition Costs and Currency Impact
While sales nudged higher, profits took a step back. Sonoco’s operating income dropped to $56 million during the quarter. That hit came mostly from acquisition-related costs and some currency remeasurement losses tied to the Eviosys deal. There were also some unfavorable pricing dynamics, but the company worked to offset that with productivity gains—think better procurement, tighter production, and cost-cutting where it made sense.
The tax rate was higher than usual too, which dragged down the bottom line further. All told, Sonoco reported a GAAP net loss of $43 million, or $0.44 per share. But on an adjusted basis, net income was $100 million, and adjusted earnings came in at $1.00 per share. Stripping out the impact from Eviosys, that number would’ve been closer to $1.17.
Solid Cash Flow and Big Investments
One area where Sonoco continues to show strength is cash flow. Operating cash flow for the full year reached $834 million—just shy of a company record. Free cash flow came in at $456 million, which helped fund a hefty $378 million in capital spending. The company is clearly putting money to work in its future.
Consumer Packaging Outperforms, Industrial Lags
From a segment view, Consumer Packaging was the standout. Sales were up 18% in that part of the business, again thanks to the Eviosys pickup and some growth in rigid paper containers. The Industrial side didn’t fare quite as well, seeing a 4% decline in revenue. That dip was partly due to how the recycling operations were reclassified earlier in the year.
Looking Ahead
Sonoco’s looking to grow adjusted net income by around 20% in 2025. A good chunk of that plan involves using cash from asset sales and free cash flow to cut debt. The goal is to bring net leverage down to somewhere between 3.0 and 3.3 times EBITDA by the end of 2026. At the same time, they’ll keep reinvesting in the core packaging business, with a focus on profitability and efficiency.
Financial Health and Stability
This is where Sonoco starts to look a bit more vulnerable. The current ratio of 0.79 suggests the company might struggle to cover short-term liabilities with short-term assets. It’s not catastrophic, but it is a red flag in terms of liquidity.
Debt is also a major concern here. At $7.35 billion, it overshadows the company’s cash reserves and weighs heavily on the balance sheet. Return on equity is just 2.86%, and return on assets is 3.3%—both numbers are low, pointing to a business that’s not getting great returns on the capital it deploys.
Despite these concerns, Sonoco still generates strong operating cash flow. That’s the anchor holding everything together. As long as cash continues to flow at this pace, the company can manage its obligations, but there’s little room for deterioration.
Valuation and Stock Performance
On a valuation basis, Sonoco is trading at a forward P/E of around 7.94, which seems incredibly cheap. But the current trailing P/E is distorted at 69.31 due to the drop in earnings. That tells us the market is pricing in some kind of earnings recovery over the next year.
Price-to-sales is just 0.88, and price-to-book is 2.05—both numbers suggest the stock is trading at a modest valuation for a mature industrial firm. Enterprise value to EBITDA sits near 19, which is high, and partly reflects the heavy debt burden.
The stock has lost almost 19% of its value over the past 12 months, while the S&P 500 moved higher. It currently trades just above $47, which is close to its 52-week low of $44.36. This underperformance has made the yield more attractive, but also signals that investors are waiting for signs of a turnaround before piling back in.
Risks and Considerations
Sonoco’s dividend appeal right now is closely tied to one thing—its ability to maintain cash flow. If that remains intact, the dividend might survive even in the face of declining earnings. But there are several risks to watch.
The most obvious is the company’s elevated debt. That amount of leverage can become a real problem if revenues continue to shrink or interest rates remain high. It limits flexibility and could lead to painful decisions down the road.
Then there’s the operating environment. A 16.7% drop in revenue year-over-year is not a small decline. If that trend doesn’t reverse, cost-cutting and restructuring might be the only paths forward—both of which can pressure earnings further in the short term.
Finally, the payout ratio is concerning. Paying out more than three times what you’re earning isn’t sustainable indefinitely. If free cash flow shrinks, the dividend may need to be adjusted.
Final Thoughts
Sonoco is at a bit of a crossroads. It’s a company with deep roots, a long history of paying dividends, and a respectable market presence. But it’s also grappling with margin pressure, high debt, and a noticeable drop in revenue.
The dividend yield is attractive, and the company’s tradition of rewarding shareholders gives some comfort. But the current financial picture is more fragile than it appears on the surface. The next few quarters will be key in determining whether Sonoco can regain its footing and maintain its payout, or whether adjustments are coming.
For income investors, the choice comes down to one key question—do you believe in Sonoco’s ability to stabilize and rebuild? If the answer is yes, the current yield offers a compelling reward for patience. If not, the numbers suggest a bit more caution is warranted. Either way, the story is far from over.