Is the Orora Ltd (ASX:ORA) share price a buy for its franked dividend yield?

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The Orora Ltd (ASX:ORA) share price is riding high, up almost 25 per cent in the last 12 months, currently trading at $3.59.

Its an impressive performance from Orora shares. In February the packaging giant reported first half revenue increased by 6.2 per cent to $2.1 billion, with net profits jumping almost 15 per cent higher to $105.7 million. The Orora interim dividend was increased by 20 per cent to 6 cents per share, 30 per cent franked.

In March, a note out of Goldman Sachs revealed its analysts initiated coverage on Orora with a buy rating. The broker placed a price target of $3.84 on Orora’s shares.

According to the note, Goldman is bullish on the packaging company for a number of reasons including the growth of ecommerce and the potential for it to expand into other high margin areas of the market.

The broker believes Orora is capable of growing by a compound annual growth rate of 7.5% through to FY 2020.

Orora dividend

The Orora dividend has been increasing nicely over the past few years.

Source: ASX

On a trailing basis, Orora shares trade on a 30 per cent franked dividend yield of 3.3 per cent, or 3.8 per cent when grossed up for franking credits.

For a growing company, and one that has just increased its interim dividend by 20 per cent, the Orora dividend yield is relatively attractive, especially given interest rates are likely to remain at these current low levels well into 2019.

Orora shares trade on a price to earnings (P/E) ratio of around 21.5 times, which is pricey when compared to the company’s size, and its relatively modest most recent revenue growth. 

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Contributors to this article may own shares in some of the companies mentioned in this article. The Capital Club has a thorough disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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Bruce Jackson has 30 years of hands on investing experience. He is passionate about stock market investing, running his own portfolio and SMSF. His focus is on small cap growth stocks. You can contact Bruce at brucej@thecapitalclub.com.au