MIDAS SHARE TIPS UPDATE: Dividends at Robinson

Dividends are a scarce commodity these days. Some companies are cancelling them out of necessity. Others, such as Driver, are cancelling them out of caution. 

Robinson Packaging, based in Chesterfield, Derbyshire, has taken a different tack. Back in March, chairman Alan Raleigh decided against paying shareholders a final dividend, citing too much uncertainty about the future. 

On June 30, however, the group said things were not looking so bad after all, so 3.5p would be paid to shareholders, as a first interim dividend for 2020. 

Robinson makes plastic packaging for food, personal care and household goods, from soup cartons to spice jars, and from detergent bottles to hand sanitisers. As consumers have eaten more at home, spent more on cleaning products and washed their hands often, Robinson has benefited. 

Deft planning meant the group kept its manufacturing plants up and running throughout the lockdown, first-half sales rose 5 per cent and profit margins improved. The firm also paid down debt, even as it continued to invest in new facilities to accelerate growth. 

Midas recommended Robinson online in 2013, when the shares were £1.30. The stock later surged to more than £2.40, but it has drifted lower in recent years. A key customer moved production to Mexico, there were issues on the board and a there was a big backlash against plastic. Now prospects are looking up. Robinson beat expectations in 2019, as sales rose 7 per cent to £35million and pre-tax profits more than doubled to £1.5million. 

Brokers at FinnCap expect that profits will be at least maintained this year. They also forecast dividends of 5.5p, on top of the 3.5p declared last month. 

The board has been beefed up, too. Raleigh was appointed in 2018 and duly brought in a new chief executive, Helene Roberts, last year. She has spent her career in the packaging industry, including 14 years at Marks & Spencer. Highly experienced in the field, she is also a keen advocate of sustainable packaging. 

Robinson was already at the forefront of product innovation, designing goods that are functional, light and made with recycled plastics wherever possible. That focus will intensify with Roberts on board. 

Clever products have helped Robinson win new customers in recent times and more business gains are likely to follow. The pandemic is also encouraging big firms such as Unilever, Kraft and Nestlé to consider using more local suppliers, such as Robinson. 

The group’s record on dividends is noteworthy, too. Even when profits came under pressure, dividends were maintained, supported by a strong balance sheet and a desire to offer shareholders decent income. 

This approach reflects Robinson’s family heritage. The business can trace its origins back nearly 200 years to when it was making willow boxes for ointments. Several members of the clan remain on the shareholder register, and finance director Guy Robinson is a descendant of the founders.

Midas verdict: Robinson shares have see-sawed over the past seven years, but steady dividends have provided some consolation. Now, it seems that the company has a new spring in its step. The group is determined to take turnover to £50million over the coming years, increase profits and enhance its reputation as a sustainable packaging specialist. At £1.09, the stock should rise – and the 5 per cent yield is a further attraction. 

Traded on: AIM Ticker: RBN Contact: robinsonpackaging.com or 01246 389280