B&G Foods (NYSE:BGS) Is Reducing Its Dividend To $0.19

B&G Foods, Inc. (NYSE:BGS) is reducing its dividend from last year's comparable payment to $0.19 on the 1st of May. However, the dividend yield of 4.9% is still a decent boost to shareholder returns.

Check out our latest analysis for B&G Foods

B&G Foods Is Paying Out More Than It Is Earning

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The company is paying out a large amount of its cash flows, even though it isn't generating any profit. These payout levels would generally be quite difficult to keep up.

Over the next year, EPS is forecast to grow rapidly. Assuming the dividend continues along recent trends, we could see the payout ratio reach 169%, which is on the unsustainable side.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the dividend has gone from $1.08 total annually to $0.76. This works out to be a decline of approximately 3.5% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Potential Is Shaky

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. B&G Foods' EPS has fallen by approximately 33% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

B&G Foods' Dividend Doesn't Look Great

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. The dividend doesn't inspire confidence that it will provide solid income in the future.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 4 warning signs for B&G Foods (of which 2 don't sit too well with us!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.