B&G Foods, Inc. (NYSE:BGS) Goes Ex-Dividend Soon
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see B&G Foods, Inc. (NYSE:BGS) is about to trade ex-dividend in the next 3 days. This means that investors who purchase shares on or after the 30th of December will not receive the dividend, which will be paid on the 1st of February.
B&G Foods's next dividend payment will be US$0.47 per share, and in the last 12 months, the company paid a total of US$1.90 per share. Calculating the last year's worth of payments shows that B&G Foods has a trailing yield of 6.2% on the current share price of $30.49. If you buy this business for its dividend, you should have an idea of whether B&G Foods's dividend is reliable and sustainable. So we need to investigate whether B&G Foods can afford its dividend, and if the dividend could grow.
View our latest analysis for B&G Foods
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Last year B&G Foods paid out 94% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Fortunately, it paid out only 49% of its free cash flow in the past year.
It's good to see that while B&G Foods's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if this were to happen repeatedly, we'd be concerned about whether the dividend is sustainable in a downturn.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see B&G Foods has grown its earnings rapidly, up 22% a year for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. B&G Foods has delivered 11% dividend growth per year on average over the past 10 years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
The Bottom Line
From a dividend perspective, should investors buy or avoid B&G Foods? It's good to see earnings per share growing and low cashflow payout ratio, although we're uncomfortable with B&G Foods's paying out such a high percentage of its profit. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of B&G Foods's dividend merits.
In light of that, while B&G Foods has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 3 warning signs for B&G Foods (of which 1 makes us a bit uncomfortable!) you should know about.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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