Why This Growth Stock Has Returned +600% in the Last Decade

Should you invest in CCL Industries Inc. (TSX:CCL.B) today?

| More on:

CCL Industries Inc. (TSX:CCL.B) is an outperformer. The stock has returned ~608% in the last decade, which equates to an annualized rate of return of 21.5%. This was three times that of the S&P 500, which had an annualized rate of return of ~7% in that period.

What does CCL Industries do?

CCL Industries is the largest label company in the world; it also makes and sells other packaging-related products. It has a diversified customer base, as it serves global markets of home and personal care, food and beverage, healthcare and specialty, automotive, electronics and consumer durables, and retail and apparel.

To make sure its business runs smoothly, it operates more than 150 state-of-the-art manufacturing facilities in North America, Latin America, Europe, Asia, Australia, and Africa.

win

Why has CCL Industries outperformed?

Rewinding a few years back, CCL Industries’s sales took off in 2013, when it acquired two business units from Avery Dennison for $500 million.

Back then, Geoffrey Martin, the CEO and president of CCL Industries stated the following:

“We are acquiring the Avery brand as part of the transaction to build on the franchise established for many decades for labels and other printable media that consumers and businesses use in digital computer printers around the world … This acquisition is the largest in CCL’s history and takes the company’s pro-forma annual revenue above $2 billion for the first time. We know both businesses well and have admired the people and the products for many years. We expect the transaction to be accretive on an earnings-per-share basis in 2014.”

Indeed, CCL Industries’s earnings per share more than doubled in 2014 and have grown at a double-digit rate since. However, the company has also made a number of acquisitions since the Avery acquisition, which should, in aggregate, help the long-term growth of the overall business.

CCL Industries has maintained a return on equity of at least 10.4% since 2011, which indicates management has made good capital-allocation decisions consistently.

In the same period, it has maintained an operating margin of at least 11%, except for one year, which shows that the acquisitions the company made did not affect its profitability.

Investor takeaway

CCL Industries has growth potential from its main business segments. Although the company offers a small yield of ~0.8%, it has increased its dividend per share for 15 consecutive years at an average rate of ~13%. Notably, most of the high growth (a rate of 32.5%) occurred in the last three years, which began with the Avery acquisition.

At ~$57.30 per share, the stock has declined +16% from its recent high and trades at a multiple of ~22.8, which isn’t cheap. However, an investment today could make sense for portfolios looking for long-term growth.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Kay Ng has no position in any of the stocks mentioned. CCL Industries is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

woman retiree on computer
Dividend Stocks

1 Reliable Dividend Stock for the Ultimate Retirement Income Stream

This TSX stock has given investors a dividend increase every year for decades.

Read more »

calculate and analyze stock
Dividend Stocks

8.7% Dividend Yield: Is KP Tissue Stock a Good Buy?

This top TSX stock is certainly one to consider for that dividend yield, but is that dividend safe given the…

Read more »

grow money, wealth build
Dividend Stocks

TELUS Stock Has a Nice Yield, But This Dividend Stock Looks Safer

TELUS stock certainly has a shiny dividend, but the dividend stock simply doesn't look as stable as this other high-yielding…

Read more »

profit rises over time
Dividend Stocks

A Dividend Giant I’d Buy Over TD Stock Right Now

TD stock has long been one of the top dividend stocks for investors to consider, but that's simply no longer…

Read more »

analyze data
Dividend Stocks

Top Financial Sector Stocks for Canadian Investors in 2025

From undervalued to powerfully bullish, quite a few financial stocks might be promising prospects for the coming year.

Read more »

Canada national flag waving in wind on clear day
Dividend Stocks

3 TFSA Red Flags Every Canadian Investor Should Know

Day trading in a TFSA is a red flag. Hold index funds like the Vanguard S&P 500 Index Fund (TSX:VFV)…

Read more »

Paper Canadian currency of various denominations
Dividend Stocks

1 Magnificent Canadian Stock Down 15% to Buy and Hold Forever

Magna stock has had a rough few years, but with shares down 15% in the last year (though it's recently…

Read more »

Man holds Canadian dollars in differing amounts
Dividend Stocks

Earn Steady Monthly Income With These 2 Rock-Solid Dividend Stocks

Despite looming economic and geopolitical uncertainties, these two Canadian monthly dividend stocks could help you generate reliable income in 2025…

Read more »