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Few Match B&G Foods On Dividend-Fundamentals Criteria

Posted
1/11/2013 5:48:00 PM
By: Investor's Business Daily
Referenced Stocks:BGS;CPA;GA;STX;UL

Few stocks can matchB&G Foods ( BGS ) as an income stock that also has strong fundamentals.

IBD ran a screen with these factors: an annualized dividend yield of at least 3.5%; a Composite Rating of 95 or better; a best-possible A in Sales + Profit Margins + Return on equity; an up-down volume ratio of at least 1.1; and daily trading volume of at least 350,000 shares daily.

In IBD's database, only B&G and three other stocks met the criteria. (The three other stocks wereCopa Holdings ( CPA ),Giant Interactive ( GA ) andSeagate Technology ( STX ).)

New Jersey-based B&G Foods makes shelf-stable food products and household products, such as Cream of Wheat, Ortega salsa and taco shells, Regina vinegars and Static Guard.

Earnings growth in the past three quarters on a year-ago basis has been strong -- 30%, 27% and in Q3, 40%. Revenue grew 20%, 15% and 16% in the same periods.

The Street expects EPS growth to be 30% in Q4 on a 20% pop in sales.

The company has benefited from a November 2011 acquisition fromUnilever ( UL ) of brands that included Mrs. Dash, Sugar Twin, Baker's Joy, Molly McButter, Static Guard and Kleen Guard.

The November 2011 acquisition contributed $20.2 million of the $21.2 million revenue increase for the third quarter.

On the chart, B&G Foods is currently shaping a second-stage pattern. The stock recently cleared resistance around 31.05, which could serve as an entry for an aggressive investor.

Volume was 59% above average.

The stock is lingering near this alternative buy point.

There are risks associated with B&G Foods.

Commodity prices -- such as those for agricultural products, meat and poultry -- could hurt margins, should inflation develop. B&G tries to lock in long-term contracts for protection.

The company's debt to equity ratio is 302%, which as the company says in its 10-K, "could restrict our ability to pay dividends."

B&G Foods also has some concentration risks. In 2011,Wal-Mart Stores (WMT) accounted for almost 18% of net sales.