Should You Trap This Keeper in Your Portfolio?

Before you go, we thought you'd like these...
Before you go close icon

The stuff of nostalgia and parodies, MeadWestvaco's (NYS: MWV) Trapper Keeper is making a comeback. Although it may not compare with the "Dawson's Creek Trapper Keeper Ultra Keeper Futura S 2000" from South Park, it's only a matter of time before the real Trapper Keeper comes with a homing device.

MeadWestvaco keeps it together
Although a retro essential, the Trapper Keeper is hardly the linchpin in the MeadWestvaco kingdom. The company keeps the calendars of the less digitally inclined organized with Mead, Five Star, AT-A-GLANCE, Day Runner, and Cambridge planners and office supplies. But more than just office and day planners, MeadWestvaco's bread and butter is packaging solutions. (The Trapper Keeper makes more sense now, doesn't it?) Its products are used in virtually every industry, including consumer electronics, health and beauty, food and beverage, tobacco ... and on and on.

In MeadWestvaco's latest quarterly earnings, it reported record profit levels in the packaging and specialty chemicals divisions. Net profit was up 78% from this time last year, to $89 million. The company has also consistently paid a $0.23 quarterly dividend from 2002 to September 2010, even when the stock plummeted in 2008. That dividend has now grown to a $0.25 per share quarterly.

MeadWestvaco is continuing to expand, and its businesses in Asia and Brazil are serving it well. Overall, about 27% of revenues are coming from emerging markets, and all signs indicate that the trend will continue.

To get a sense of how the overall packaging industry is doing, check out giants International Paper (NYS: IP) and Boise (NYS: BZ) and their gross margins over the past four quarters,

Company

Latest Quarter

Q1

Q2

Q3

MeadWestvaco24.3%23.4%25.3%23.2%
International Paper27.0%27.6%27.0%29.2%
Boise18.9%20.3%24.0%24.6%

Source: Capital IQ, a division of Standard & Poor's.

While Boise has seen declining gross margins sequentially, MeadWestvaco and International paper have shown more consistent margins.

If you're looking for something new and exciting on the packaging front, you're not in luck. None of these companies has reported research-and-development expenses, which, in a field like packaging, implies a formula that's working.

With no R&D expenses, it seems that MeadWestvaco won't be rolling out a Trapper Keeper with 10 different compartments for every subject in school, an electronic pencil sharpener, four plastic bags with electronic zippers, a copy machine, fax, flat-screen TV, On-Star, and an awesome picture of Dawson's Creek anytime soon. But the future is just around the corner, and someday the Trapper Keeper will surely be able to transport us through space. Don't you want to be able to say you got in early?

Add MeadWestvaco to My Watchlist, or check out what Fools are saying about it in the CAPS community.

At the time this article was published Fool contributor Molly McCluskey owned a Trapper Keeper but doesn't own shares or hold leadership positions in any of the companies mentioned. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

From Our Partners