B&G Foods Has Almost Doubled Its Dividend Since 2010

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A company that grows through acquisitions can step up growth fast.

This has been the strategy atB&G Foods ( BGS ). It's an approach that works especially well in an environment of low interest rates.

Just recently CEO David Wenner pointed out that the company issued $700 million of senior notes at 4.625%, which allowed B&G to retire its 7.625% senior notes.


Interest rates are rising, though, and many market watchers see that as a trend. Will that affect B&G?

At the July 18 earnings call, Wenner said: "You have to be a little more cautious here as interest rates start inching up."

A second factor works in B&G's favor on the acquisition front. B&G is small enough that acquiring a niche player can help B&G's top and bottom lines.

The big players in the packaged food group -- companies like Unilever ( UL ) andGeneral Mills ( GIS ) -- generally don't compete for the small targets. In fact, sometimes the businesses B&G acquires are orphan brands within the big companies.

Competition typically comes from private equity firms.

At a Boston conference in 2012, Wenner said, "We are very, very good at executing on acquisitions." It's not bragging if you can do it. B&G typically likes to grab companies or brands in a sales decline and then turn them around "to generate modest organic growth."

B&G's brands include Cream of Wheat, Ortega and Static Guard.

Earnings increased 48%, 21% and 24% on revenue gains of 2%, 6% and 17% in the past three years. The Street expects 13% EPS growth on sales growth of 14% this year.

The quarterly dividend has nearly doubled since 2010. The annualized yield is 3.7%.

The stock has formed a flat base with a 36.59 buy point.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas

Referenced Stocks: BGS , GIS , UL

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