This Defensive Food Stock Offers a 4% Dividend and Strong Growth Potential
What if you could get 4.2% in dividends year after year with a lower risk investment? This diversified food company has many leading brands and the ability to survive the ups and downs of the market.
Over the past two months, investor preferences have quickly shifted from high-flying momentum growth stocks to more defensive companies with stable revenues that have strong cash flow and pay dividends. As this trend continues investors are looking for more places to get attractive returns with lower risk.
One recession proof company is currently paying a 4.2% dividend. It is in a category where people spend money in good times and bad. Food is something we all need to live. We won’t stop buying food. We will still head to the supermarket each and every week no matter how hard times get. We will go there when times are good as well.
Now when you go to the supermarket, do you and your family see and buy any of these brands:
- Baker’s Joy baking spray
- B&M Baked Beans
- Cream of Wheat
- Emeril’s sauces, soups, or seasonings – Bam!
- Maple Grove’s Farm of Vermont salad dressings, pancakes, and syrups
- Mrs. Dash salt free seasonings
- Ortega Mexican Meals, sauces, and salsas.
If so, you are already familiar with B&G Foods (NYSE: BGS). These are just a few of their brand lines. B&G Foods specializes in manufacturing, selling and distributing diverse range of food products, including cereals, canned meats, spices, seasonings, salad dressings and other specialty food products. The Company distributes these products through a network of independent brokers to supermarket chains, warehouse clubs and mass merchants in United States, Puerto Rico and Canada.
Check out the chart over the past 12 months:
The company’s share price was stuck in neutral for a while and it’s finally starting to break out again. They currently pay a $0.34 per share quarterly dividend, which increased 25.9% last year. The current yield is 4.2%. This is much better than you can get in a money market and you have the ability to see an increasing dividend as profits rise. It is a smaller lesser-known company giving it appeal as an “off the beaten path” investment idea with great potential. Unlike a bond that pays a fixed payment for the duration of time you own the bond, a company can increase its dividend year after year, providing some inflation protection.
Looking at the five point stock inspection, B&G Foods is a good value and strong fundamentals:
5-Point Stock Inspection on BGS:
Financial Strength: Positive
Valuation: Positive – Buy up to $34
Risk: Positive – Low Risk Beta (0.7)
Earnings Trend: Positive
12-month price target: $40
Bottom Line: B&G Foods (NYSE: BGS) is a good buy up to $34 per share and offers an attractive 4.2% dividend. Our 12-month price target is $40 per share. This would provide a 25% gain if you bought at today’s price and it hits our target. People will continue buying food and companies like B&G Foods should continue to see strong demand even in the toughest of times.
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