High Dividend 50: B&G Foods

Updated on June 20th, 2024 by Bob Ciura

High-yield stocks pay out dividends that are significantly in excess of market average dividends. For example, the S&P 500’s current yield is only ~1.3%.

High-yield stocks can be very helpful to shore up income after retirement. A $120,000 investment in stocks with an average dividend yield of 5% creates an average of $500 monthly in dividends.

B&G is part of our ‘High Dividend 50’ series, where we cover the 50 highest yielding stocks in the Sure Analysis Research Database.

We have created a spreadsheet of stocks (and closely related REITs and MLPs, etc.) with dividend yields of 5% or more…

You can download your free full list of all high dividend stocks with 5%+ yields (along with important financial metrics such as dividend yield and payout ratio) by clicking on the link below:

The stock offers a high dividend yield above 9%, but this is due to the continued decline in share price over the past several years. The company also cut its dividend by 60% in 2022.

In this article, we will analyze the packaged and frozen foods company B&G Foods (BGS).

Business Overview

B&G Foods was created in the late 1990s with the initial purpose of acquiring Bloch & Guggenheimer, who sold pickles, relish, and condiments. Bloch was founded in 1889. Last year, the company had just over $2 billion in sales.

Some of the company’s well-known brands include Green Giant, Ortega, Cream of Wheat, Mrs. Dash, and Back to Nature, with over 50 brands in total. The product portfolio focuses on shelf-stable, frozen and snack brands.

B&G Foods reported first-quarter 2024 results on May 8th, 2024. Quarterly revenue of $475 million declined 7% year-over-year, due mostly to lower volume and the divestiture of the Green Giant U.S. shelf-stable product line.

Adjusted earnings-per-share declined 33% year-over-year, to $0.18 per share.

B&G Foods also reduced 2024 guidance, and now expects net sales in a range of $1.955 billion to $1.985 billion (from $1.975 billion to $2.020 billion previously), and adjusted EPS between $0.75 to $0.95 (from $0.80 to $1.00 previously).

Growth Prospects

B&G Foods has spent the last decade acquiring food brands in debt-financed deals, followed by scaling these businesses and raising product prices over time.

This strategy worked for many years, continuing through the COVID-19 pandemic, which positively impacted the company’s results.

However, these positive impacts faded, and results in the past five years indicate a deteriorating business. B&G Foods reported net losses for 2022 and 2023, due to high operating costs and interest expense.

Source: 2023 Annual Report

In response, the company is reshaping its brand portfolio.

For example, in November 2023, B&G Foods sold its Green Giant U.S. shelf-stable vegetable product line to Seneca Foods Corporation, which was the primary co-manufacturer of the product line.

The net proceeds used to reduce long-term debt. B&G will continue to own Green Giant frozen, Green Giant Canada and the Le Sueur brand.

Management has stated it is accelerating the reshaping of its brand portfolio, and may pursue additional divestitures which account for 10% to 15% of its current consolidated net sales. For example, it is evaluating the divestiture of its Frozen & Vegetable business assets.

We believe B&G Foods will generate approximately 7.0% earnings-per-share growth per year over the next five years off this low comparison base.

As of March 30th 2024, the company had long-term debt of $2.01 billion, up slightly from the previous year.

Furthermore, interest expense totaled $37.8 million in the 2024 first quarter, which accounted for approximately 35% of gross profit in the first quarter.

Competitive Advantages & Recession Performance

B&G Foods has no significant competitive advantages in our opinion. The company does not possess a strong moat, has second-tier brands, and may not have the pricing power they expect given the ongoing inflationary challenges.

B&G Foods’ earnings-per-share throughout the Great Recession of 2007-2010 are listed below:

2007 earnings-per-share of $0.62
2008 earnings-per-share of $0.27 (56% decline)
2009 earnings-per-share of $0.61 (126% increase)
2010 earnings-per-share of $0.90 (48% increase)

B&G Foods’ earnings-per-share declined significantly in 2008. However, the company went on to about fully recover by 2009. B&G’s earnings continued to grow once the recession ended.

However, due to a combination of weak sales, cost inflation, and high interest rates, B&G Foods finds itself in a difficult financial position. This has led the company to cut its dividend and divest various businesses to raise cash.

Dividend Analysis

In 2023, B&G cut its quarterly dividend by 60%. Following the dividend cut, B&G Foods’ forward annual dividend per share stands at $0.76. B&G has a very high yield of 9.1% at the current share price.

We expect B&G to generate adjusted EPS of $0.80 for 2024. At this EPS level, the dividend payout ratio is expected to be 95% for this year.

B&G Foods’ dividend is not secure, due to the very high dividend payout ratio, along with the stressed balance sheet. In a best-case scenario, the company can maintain its dividend with earnings-per-share growth and successful divestitures.

Final Thoughts

B&G Foods is a stable company with solid revenues, but the majority of its brands are not top-tier, which means the company lacks competitive advantages.

The company’s dividend payout ratio is very high, and is nearly unsustainable. The payout ratio may moderate if the company can successfully grow its earnings.

However, high interest expense and long-term debt will weigh on earnings, which is also forcing the company to sell off some of its brands.

Therefore, B&G Foods would be a risky holding for a dividend growth portfolio at this time.

If you are interested in finding high-quality dividend growth stocks and/or other high-yield securities and income securities, the following Sure Dividend resources will be useful:

High-Yield Individual Security Research

Other Sure Dividend Resources