Even a company with sizable market cap and a healthy dividend can elude investors’ attention. Bemis Co. (NYSE: BMS) is a true stealth stock. That’s because Bemis is strictly a background player, providing the flexible packaging for food and beverage vendors to showcase their wares—from frozen pizzas to condiments.

Although the packaging industry is largely cyclical, Bemis earns more than 70 percent of its revenue by providing flexible packaging to the more defensive consumer nondiscretionary realm. In a recession, people still need to eat the food package by Bemis’ products, even if they otherwise rein in their spending.

In addition to its defensive qualities, Bemis offers a 3.3 percent dividend yield. And that income stream could improve further, as Bemis has increased its dividend for 28 consecutive years.

Bemis differentiates itself from the competition in its crowded sector with a strong focus on materials science. Its extensive research and development efforts enable it to offer higher-margin packaging that requires fewer materials and extends the shelf lives of products.

Among Bemis’ latest innovations, its FreshCase vacuum package greatly extends the shelf life of meat. And its Dip & Squeeze condiment packaging provides vendors dual-function packaging that can be used in fast food restaurants or sold via retail.

Management is navigating challenging economic headwinds as a result of commodity price inflation. Bemis uses petrochemical-derived materials in many of its products. When the price of petroleum spikes, as it did earlier this year, Bemis’ margins suffer. In 2011, for example, Bemis experienced 15 percent to 30 percent spikes in the cost of raw materials in the first quarter.

The company’s contracts with many of its customers allow it to pass along the costs of such inflation. But the typical contract includes a time lag between when these higher costs are incurred and when the prices of their products can be subsequently adjusted. For Bemis’ legacy products, the typical period ranges from 30 to 90 days. During periods of inflation, these pricing lags can cause lumpy sequential quarterly earnings.

Bemis greatly expanded its product lines with its March 2010 acquisition of Alcan Packaging’s food Americas operation. The $1.2 billion deal increased the firm’s annual revenue by about 40 percent. Unfortunately, Food Americas’ customer contracts typically require the company to wait as long as six months before passing along inflation costs to customers. Management expects to renegotiate these contracts to more favorable terms in the years ahead.

At the outset of the third quarter, raw materials prices stabilized, so management expects earnings per share to strengthen during the second half of the year, especially after their contracts adjust for inflation.

Once Bemis fully integrates its Food Americas acquisition, it could surprise the market with greatly improved gross margins. In the interim, the company is using its free cash flow to reward patient investors with share buybacks and a steady dividend.