3 Dividend Stocks That Are Reasonably Valued: ConocoPhillips (COP), Realty Income Corp (O), B&G Foods, Inc. (BGS)

B&G Foods, Inc. (NYSE:BGS) – Dividend Yield: 4.0%

B&G Foods makes, sells and distributes a range of shelf-stable food and household products. They grow not by creating huge, global brands but by levering up their balance sheet and acquiring smaller brands. The acquired brands tend to be number one or number two in their markets and the company tries to buy them at lower multiples so as to achieve very strong margins.

Their business model is to take well-known, yet neglected brands from larger companies and to add “pizazz” to turn them around. Being smaller brands, they do not need much marketing expenditure. This leads to EBITDA margins which are higher than most other foods companies and significant cash flow which can be used to pay dividends and make additional acquisitions when needed. Some of these brands you might know are: Mrs. Dash, Baker’s Joy, Molly McButter, Kleen Guard, Static Guard, Cream of Wheat and Ortega.

Their latest acquisition of Old London, New York Style and Culver brands have accounted for nearly all of B&G Foods, Inc. (NYSE:BGS)’s growth in the last year. To be sure, this is a slower-growth company with a higher level of debt. If you are OK with these things, B&G provides high EBITDA margins and lots of cash to shareholders.

The stock has pulled back on disappointing earnings results as sales volume actually declined when new acquisitions were taken out. I believe B&G’s tenured senior management will be able to turn things around and the result will be substantial rewards for shareholders.

Summary

My article is meant only to be an introduction to the above companies and a reminder that their prices are very reasonable. The intent is to be a jumping point for further research. These companies don’t come without risk. ConocoPhillips does currently have a funding gap. I believe they will get past the funding gap and be in a great position in the future. B&G does have a lot of debt but I trust their long-tenured management to grow cash flow from accretive acquisitions. All companies here, I believe, are great companies and are available at a discount.

The article 3 Dividend Stocks That Are Reasonably Valued originally appeared on Fool.com and is written by Casey Hoerth.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.