Flowers Foods, Inc. (FLO): Predictable Dividend Growth and a 3.2% Yield

Dividend Analysis: Flowers Foods

We analyze 25+ years of dividend data and 10+ years of fundamental data to understand the safety and growth prospects of a dividend. Flowers Foods’ long-term dividend and fundamental data charts can all be seen by clicking here.

Dividend Safety Score

Our Safety Score answers the question, “Is the current dividend payment safe?” We look at factors such as current and historical EPS and FCF payout ratios, debt levels, free cash flow generation, industry cyclicality, ROIC trends, and more. Scores of 50 are average, 75 or higher is very good, and 25 or lower is considered weak.

Flowers Foods has a strong Dividend Safety Score of 73. The company’s dividend has consumed 65% and 39% of its earnings and free cash flow, respectively, over the last 12 months. Considering the predictable nature of selling bread and other baked goods, these are very healthy payout ratios.

As seen below, Flowers payout ratios have increased a bit over the last decade but have mostly been stable, underscoring the quality and reliability of the business.

Source: Simply Safe Dividends

As we mentioned earlier, most of the company’s products are needed by consumers regardless of economic conditions. Flowers’ revenue fell by just 1% in fiscal year 2010, and the company’s reported earnings grew each year during the recession. FLO’s stock also returned 6% in 2008, outperforming the S&P 500 by 43%. Flowers is clearly a recession-resistant business, and it’s no surprise why consumer staples is one of the best stock sectors for dividends.

Source: Simply Safe Dividends

Flowers’ dividend safety is also enhanced by the company’s consistent free cash flow generation. The company has generated positive free cash flow in each of its last 11 fiscal years, a sign of a healthy business that can sustainably pay and grow its dividends.

Source: Simply Safe Dividends

Flowers’ has also earned a strong and steady return on equity in the mid- to high-teens most of the last decade. The company is earning great returns for shareholders and can compound its earnings at a faster rate than many other businesses.

Source: Simply Safe Dividends