Sometimes you just find a nugget of gold!

As I was scanning through the financial headlines this morning I saw the news item: "Sonoco earnings up 77%". I thought, great, I wonder how an oil company can generate that kind of profit in this economic environment?

A little digging and I found my error. Sunoco, Inc. (NYSE: SUN), is the energy company. Sonoco Products Co. (NYSE: SON) is a manufacturer. I had not come across Sonoco in the past so I thought I would take a closer look. I am glad I did, as this is a good company from an investor's viewpoint.

Sonoco Products is a manufacturer of industrial and packaging products. They have operations in 35 countries, over 17,000 employees and over $4 billion in revenues. The company will be 110 years old next month. The original name was The Southern Novelty Company and was changed to Sunoco Products in 1923. The company currently manufactures a very diverse line of paper and plastic products used for packaging, storage and display.

Reading past the headline, today's quarterly earnings release is actually a mix of good news and negative results from the global economic slowdown. Revenues were 23% lower than the 1st quarter of 2008. And core earnings, without restructuring charges, were 29¢ per share vs. 54¢ from a year earlier.

The good news is that the company's decision to shift away from industrial products (which have been declining in sales due to economic conditions) to consumer packaging is paying off. Consumer packaging net income increased for the 5th straight year, quarter over quarter. Also, in the real money world, cash generated from operations for Q1, 2008 was $75.5 million compared to $64 million in the same quarter of 2008. Over the last year total debt decreased from $840 million to $667 million.

The item that really caught my eye about Sonoco Products was the dividend. They have made a distribution for 336 consecutive quarters! Historically, Sonoco has paid out about 50% of their net as dividends. Over the last 20 year the annual dividend has increased steadily from 35¢ to the current $1.08 per year. At the current share price the stock is yielding 4.9%, which is still very good.

With Sunoco Products I see a company that is working to control their costs in these difficult economic times and can still bring nice profits to the bottom line. The first quarter is historically the companies toughest and they are forecasting 2009 total earnings of $1.55 to $1.75 per share.

Sonoco earned $1.63 in 2008 after earning $2.10 per share in 2007. This is a company that has struggled with revenues as the global economy has slowed but again I note they are still profitable and working to reduce overhead and restructure their product lineup to products with more growth potential and smaller cyclical swings. I think this stock would be a nice place to earn a near 5% dividend while waiting for economic growth to resume. Stock appreciation and dividend earnings could make this a double by the end of 2010. I always like to keep an eye on a new found stock idea for a while, but this one is definitely going on my watch list.