B&G Foods, Inc.’s (BGS - Free Report) board of directors announced a 2.2% hike in the company's quarterly dividend rate to 47.5 cents from 46.5 cents paid earlier, in a bid to reward its shareholders. The new dividend is scheduled to be paid on Jul 30 to its shareholders of record as of Jun 29, 2018.
Based on the increased rate, the annual dividend comes to $1.90 per share, up from the prior annual rate of $1.86 per share. This leads to an annualized yield of 7.2%, considering the company’s closing price of $26.50 on May 22.
Solid dividend payouts perhaps remain the biggest incentive for this food company and the company remains committed to boost its shareholders’ wealth. This cash dividend payment represents the 55th consecutive dividend distribution of the company since its initial public offering in October 2004. An income-generating and high dividend-yielding stock has always been on the investors’ desired list.
Earlier this year, the company laid out strategic plans for 2018 that would return to the modest growth, stable margins and strong free cash flow generation model. Net cash provided by operating activities increased $71.3 million to $73.7 million in the first quarter of 2018 from $2.5 million in the year-ago period. The increase was primarily attributable to favorable working capital compared with the first quarter of 2017.
B&G Foods churns cash flow per share of $2.94 compared with the industry average of $2.62. Stable cash flow will aid the company sustain its dividend payout in the future. Meanwhile, sub-optimal utilization of equity has resulted in a return on equity of 16.6% compared with its industry’s figure of 11%, implying that it is efficient in using its shareholders’ funds.
Also, B&G Foods currently has a trailing 12-month P/E ratio of 12.7, below the industry’s average of 18.1x. Also, the company has a forward P/E ratio of 12.8, below the industry’s 17.3x. It is fair to say that a slightly more value-oriented path may be ahead for the stock in the near term as well. These ratios show that the company is undervalued in comparison to its industry peers and thus, it a good time to place a bet on the stock.
Investors should keep in mind that B&G Foods' shares have lost around 24.6% so far this year, comparing unfavorably with the 13.7% decline of its industry. The 24.6% decline also compares unfavorably with the broader Consumer Staples sector’s decrease of 12.9%. However, earnings estimates have moved 0.5% north for 2018 and 0.9% for 2019, over the past 30 days, reflecting investors’ optimism over the stock’s earnings potential.
The recent dividend hike is expected to bolster investors’ confidence in the company’s financials, improve its market position against competitors and lend upside to the stock.
Zacks Rank and Key Picks
Currently, B&G Foods carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the Zacks Consumer Staples sector are Medifast, Inc. (MED - Free Report) , Lamb Weston Holdings, Inc. (LW - Free Report) and The Chefs' Warehouse, Inc. (CHEF - Free Report) . You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Medifast, a Zacks Rank #1 stock, has an expected EPS growth rate of 59.4% for 2018.
Lamb Weston Holdings, a Zacks Rank #2 (Buy) company, is expected to register 12.1% EPS growth this fiscal.
Another Zacks Rank #2 stock, Chef’s Warehouse’s earnings are expected to grow 65.9% in 2018.
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