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Over the past 10 years B&G Foods, Inc. (NYSE:BGS) has been paying dividends to shareholders. The company currently pays out a dividend yield of 8.1% to shareholders, making it a relatively attractive dividend stock. Let's dig deeper into whether B&G Foods should have a place in your portfolio.
How I analyze a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is its annual yield among the top 25% of dividend-paying companies?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has dividend per share amount increased over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does B&G Foods fit our criteria?
The company currently pays out 72% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. Going forward, analysts expect BGS's payout to increase to 106% of its earnings. Assuming a constant share price, this equates to a dividend yield of 8.4%. However, EPS is forecasted to fall to $1.81 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income. This also brings about uncertainty around the sustainability of the payout ratio.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there is one thing that you want to be reliable in your life, it's dividend stocks and their constant income stream. In the case of BGS it has increased its DPS from $0.68 to $1.9 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes BGS a true dividend rockstar.
Relative to peers, B&G Foods produces a yield of 8.1%, which is high for Food stocks.
Taking into account the dividend metrics, B&G Foods ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three essential aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for BGS’s future growth? Take a look at our free research report of analyst consensus for BGS’s outlook.
- Valuation: What is BGS worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether BGS is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.