Total revenue soared 49.8% in the most-recent quarter as a $1.7 billion packaging-industry acquisition began to pay off for this leader in printing.

The company’s overall revenue improved 4.8% despite declining printing revenues. Its packaging business now provides more than half of its revenue.

The stock yields a high 5.9% after the company most recently raised its dividend by 4.8%.

TRANSCONTINENTAL INC. (Toronto symbol TCL.A; www.tctranscontinental.com) is Canada’s leading printer of advertising flyers, magazines, books and newspapers.

Due to declining demand for printed products as advertisers shift their spending to the Internet, the company plans to close its printing plant in Brampton, Ontario, by the end of 2019.

Transcontinental did not say how much it will pay in severance and other costs. However, it will shift the Brampton facility’s functions to its other plants in Ontario and Quebec, which have more-efficient printing presses. The lower operating costs should help offset the closure expenses.

However, the company recently completed its $1.7 billion acquisition of Chicago-based Coveris Americas in May 2018. That firm makes plastic packaging for consumer and industrial products at plants in the U.S., Canada, the U.K., Ecuador, Guatemala, Mexico, New Zealand and China.

With the Coveris purchase, Transcontinental now gets over half of its revenue from packaging. That cuts the company’s reliance on its traditional commercial printing operations and advertising flyer distribution.

Thanks to the new operations, total revenue in the fiscal 2019 first quarter, ended January 27, 2019, jumped 49.8%, to $751.6 million from $501.7 million a year earlier. Coveris, along with a smaller acquisition, contributed $316.6 million in the latest quarter. Excluding acquisitions and exchange rates, revenue improved 4.8%.

Value Stocks: Improved earnings will help the company pay down loans

Due to higher interest costs as a result of the loans that Transcontinental used to help fund the Coveris acquisition, earnings fell 12.2%, to $45.5 million from $51.8 million. The company also sold shares to help pay for the purchase, so overall earnings per share declined 22.4%, to $0.52 from $0.67.

By eliminating overlapping operations between Coveris and its existing business, Transcontinental expects to reduce its annual costs by $10 million U.S. in the first year. That annual savings should rise to $20 million U.S. by the end of the second year.

The improved earnings will help the company pay down the loans it took out to buy Coveris. Transcontinental’s long-term debt was $1.2 billion as of January 27, 2019. That’s a high, but still manageable 92% of its market cap. It also held cash of $53.7 million.

Transcontinental will probably earn $2.51 a share for all of fiscal 2019, and the stock trades at a low 6.0 times that forecast. The company also recently raised its quarterly dividend by 4.8%, to $0.22 a share from $0.21. The new annual rate of $0.88 yields a high 5.9%.

Recommendation in The Successful Investor: Transcontinental is a buy.