© Reuters.
THOMASVILLE – Flowers Foods (NYSE:), a leading producer and marketer of packaged bakery goods in the United States, has announced an increase in its quarterly dividend to $0.23 per share, scheduled for distribution on December 15th. This change represents an annual yield of 4.4% for shareholders, signaling the company’s confidence in its financial performance despite previous concerns about dividend sustainability.
The decision to raise dividends comes even as Flowers Foods’ previous payout ratio exceeded its earnings by 140%, sparking debates about the long-term viability of such a generous dividend policy. However, the company forecasts that anticipated earnings per share (EPS) growth could bring future payout ratios down to a more manageable level of around 50%.
Over the past decade, Flowers Foods has demonstrated a commitment to increasing shareholder returns, with its annual total dividend climbing from $0.427 in 2013 to $0.92. This consistent growth reflects an average annual increase of approximately 8%. Despite this positive trend, some investors remain cautious due to an average decline in EPS over the past five years, which typically raises concerns about the stability of dividend policies.
Given these dynamics, investors are advised to consider a variety of factors beyond just dividend yield when evaluating Flowers Foods as an investment option. The company’s ability to sustain and potentially grow earnings is a critical factor that could support future payouts. In addition, investors seeking income might look at other high-yielding dividends for portfolio diversification while keeping an eye on established patterns of earnings growth that can provide a foundation for reliable dividends moving forward.
InvestingPro Insights
According to real-time data from InvestingPro, Flowers Foods (FLO) has a market capitalization of $4.42 billion and a P/E ratio of 32.61, indicating a relatively high valuation. Over the last twelve months as of Q3 2023, the company’s revenue growth was 7.18%, and its gross profit margin was 48.06%, suggesting a healthy profitability level.
InvestingPro Tips highlight that Flowers Foods has raised its dividend for 10 consecutive years and has maintained dividend payments for 22 consecutive years, affirming the company’s commitment to returning capital to shareholders. Analysts predict the company will be profitable this year, which could support the company’s dividend policy and potentially contribute to future payout ratios.
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