B&G Foods, Inc. (NYSE: BGS) will pay a dividend of $ 0.47 on July 30. Based on this payment, the dividend yield on the company’s shares will be 6.5%, which is an attractive incentive for shareholder returns.
See our latest review for B&G Foods
B&G Foods income easily covers distributions
While it is good to have a high dividend yield, we also need to consider whether the payout is sustainable. Prior to this announcement, B&G Foods was paying 93% of profits, but a relatively small 57% of free cash flow. This leaves a lot of money to reinvest in the business.
Earnings per share are expected to increase 7.1% over the next year. If recent dividend trends continue, the 12 month payout ratio could be 92% which is a bit high but can certainly be sustainable.
B&G Foods has a solid track record
The company has a strong history of paying dividends with very little fluctuation. The first annual payment in the past 10 years was $ 0.68 in 2011, and the most recent year’s payment was $ 1.90. This means that he increased his distributions by 11% per year during this period. We can see that the payments have shown very good upward momentum without weakening, giving some assurance that future payments will be reliable as well.
The dividend has growth potential
Investors in the company will be happy to receive dividend income for some time. We are encouraged to see that B&G Foods has increased its earnings per share by 7.3% per year over the past five years. EPS has grown at a reasonable pace, although with most profits going to shareholders, growth prospects may be more limited in the future.
Overall, it’s nice to see a consistent dividend payout, but we believe in the longer term the current level of payout could be unsustainable. Payments haven’t been particularly stable and we don’t see huge growth potential, but with the dividend well covered by cash flow, it could prove to be reliable in the short term. We don’t think B&G Foods is a good stock to add to your portfolio if income is your goal.
Market movements attest to the high value of a coherent dividend policy compared to a more unpredictable one. Still, there are a host of other factors that investors need to consider, aside from dividend payments, when analyzing a business. Just as an example we have encountered 2 warning signs for B&G Foods you should be aware of that, and one of them doesn’t suit us very well. Looking for more high yield dividend ideas? Try our organized list of good dividend payers.
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