Wall Street Loves This 7.08% Dividend Stock and So Will Passive Income Investors

Investing

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Published: April 30, 2024 1:15 pm

A by-product of both the development of urban cities and the expansion to the Pacific Coast during the 1800’s was the introduction of packaged foods. B&G Foods, Inc. (NYSE: BGS) is an American company that can trace its product history back to 1822, and its products have been a part of American culture and history through the Civil War, the inventions of cars, planes, and television, both World Wars, the Civil Rights Movement, Woodstock, The end of the Cold War, home computers, the internet, smartphones, social media, all the way to the present day.

With 68% of its stock held by institutions, B&G Foods is a consumer defensive stock that can serve as part of a portfolio hedge against economic downturns that can result from the recent mass corporate layoffs and ever-increasing inflationary environment. Several analysts, including Zacks, are rating it a “Strong Buy” or “Buy” at the time of this writing, due to a number of fundamental analysis metrics which will be listed below. But first, some history:

Foods Over the Centuries

Trappey’s Red Devil Pepper Sauce is a popular B&G Foods brand.

B&G Foods’ expansion has been primarily a result of acquisitions of food brands that had cache, but had become “orphans” that no longer fit its previous parent owners. Many of its brands have been in existence for over a century, with Underwood, its oldest brand, marking 202 years.

B&G stands for founders Joseph Bloch and Julius Guggenheimer, who founded a pickle business in New York City, circa 1889. B&G Pickles is still a popular brand today, as is Underwood, which is known for its canned Deviled Ham and condiment spreads, and is the oldest trademark registered in the US still in use.

Subsequent B&G brands that would be acquired through the rest of the 19th and 20th centuries that have become staples of American diets include:

Cream of Wheat
Polaner Jams and Jellies
Green Giant Frozen and Canned Vegetables
B&M Baked Beans
Clabber Girl baking products
Crisco Oil
Durkee Spices and Sauces
Fleischmann’s (Margarine and Baker’s Yeast)
Maple Grove Farms of Vermont syrups and salad dressings
McCann’s Steel Cut Irish Oatmeal
Old London (crackers and chips)
Trappey’s Hot Sauces
Ortega Mexican foods
Scalfani Italian canned tomato products
Static Guard (a non-food exception for laundry treatments)

Management Moves For the Future Lauded by Analysts

Analysts who have recently rated B&G Foods a “Strong Buy” or “Buy” have cited a number of price ratio and cost cutting measures as justifications.

Analysts have praised B&G’s recent product portfolio diversification and inventory reduction initiatives that improved profit margins in Q4 2023 to 21.9%, 130 basis point improvement, as well as cutting debt by $335 million.

Some other fundamental analysis positives worthy of note to justify their “Buy” ratings::

B&G’s price-to-book ratio is 1,06, whereas the industry’s average is 2.22.
B&G’s forward price-to-earnings ratio is 13.11 against the industry average of 16.78.
B&G’s price-to-sales ratio is 0.41, vs the industry average of 0.91.

An Investor’s Perspective – Why B & G is Worth Consideration

While B&G stock may be at the middle of its 52-week range at present, it has over 50% upside potential if the bullish analysts are correct in their prognostications.

For investors looking into B&G Foods stock, the all time high price is slightly over $51 per share, while the 52-week range at the time of this writing is $7.20 – $16.68. Given that at a current price of roughly $10.73, which will also include a 7.08% yield, there is over 50% upside potential before a significant resistance level.

Nearly 70% of the float is in the hands of institutions, so any surge of buying has a good chance of making its mark with noticeable gains.

The fact that B&G Foods has never failed to pay a dividend ever since its IPO is also a source of reassurance.

Consumer defensive stocks, a category which includes food suppliers, are considered “defensive” because their businesses are unaffected by other market downtowns, due to their indispensibility. Many economists believe thatt he current inflationary environment is a warning sign for a significantly more severe economic downturn. Forewarned is forearmed.