Flowers: A Baking Bet for Growth and Yield

09/03/2019 5:00 am EST

Focus: CONSUMER

Ned Piplovic

Assistant Editor, Eagle Financial Publications

Founded in 1919 as Flowers Industries, the company changed its name to Flowers Foods (FLO) in 2001. The company produces and markets bakery products in the United States through two business segments — Direct Store Delivery and Warehouse Delivery, notes Ned Piplovic, editor of DividendInvestor.

The Direct Store Delivery segment produces and markets fresh breads, buns, rolls, tortillas and snack cakes. This segment offers its products primarily under the Nature’s Own, Wonder, Cobblestone Bread Company, Tastykake and Dave’s Killer Bread brand names.

The Warehouse Delivery segment produces snack cakes, frozen breads and rolls for national retail, foodservice, and vending customers; it markets its products under the Mrs. Freshley’s, Alpine Valley Bread and European Bakers brand names. This segment also sells products under franchised and licensed trademarks, such as Sunbeam, Bunny and Sara Lee.

Since the name change and reorganization in 2001, Flower Foods has boosted its annual dividend payout every year.  Over that period, the company has enhanced its annual distribution amount more than 11-fold, which corresponds to an average growth rate of 16.5% per year. Additionally, Flowers Foods managed to maintain a dividend growth rate of nearly 10% over the last five years.

The company’s current $0.19 quarterly dividend is 5.6% higher than the $0.18 distribution in the same period last year. This current quarterly payout amount is equivalent to a $0.76 annualized distribution and a 3.34% forward dividend yield.

The company’s shareholders enjoyed the combined benefits of rising dividend income and asset appreciation with a total return on investment of 14.3% just over the trailing 12 months.

While the share price pullback in 2015 and 2016 limited the five-year total return to just 34%, the three-year total return was significantly better at 65%.

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