Flowers Foods (FLO): Assessing Valuation After Another Dividend Boost Despite Payout Concerns

If you are examining what to do next with Flowers Foods (FLO), the latest news probably caught your eye. The company just declared its 92nd consecutive quarterly dividend and even nudged the payout up by 3.1% compared to last year’s same period. On the surface, that’s a sign of stability; few companies can boast that kind of consistency. However, while dividends keep flowing, Flowers is now distributing 93% of its earnings as dividends, which is a fairly high proportion. With that much going out the door, investors are right to wonder if the dividend, and therefore the stock’s steady reputation, is on solid ground. Looking at the broader picture, the last year has been tough for Flowers Foods. The stock is down around 32% in the past year, reflecting worries about declining sales and earnings per share. Momentum has not favored the bulls for a while, and even the modest growth in annual revenue has not been enough to turn sentiment around. The company’s increased dividend feels like an effort to reward patient shareholders, but it comes at a time when results are not delivering the growth story many hoped for. So the real question is this: is Flowers Foods now an undervalued pick, or is the market rightly worried the future growth just will not materialize?

Most Popular Narrative: 3% Undervalued

According to the most widely followed narrative, Flowers Foods appears slightly undervalued versus its estimated fair value, driven by analyst expectations for gradual growth in the years ahead.

“The accelerating shift away from traditional bread, driven by increased adoption of low-carb, keto, and fresh, minimally processed foods, is expected to shrink Flowers Foods' core markets. This is putting persistent downward pressure on long-term revenue growth and hindering the company's ability to fully offset volume declines with innovation.”

Curious what’s propelling Flowers Foods’ price target beyond its current struggles? This narrative hinges on a unique blend of slow revenue growth, shifting profit margins, and an ambitious future price-to-earnings multiple. Want to uncover which financial bets and bold assumptions analysts are stacking up to reach that fair value? See the full narrative for the details that could make the difference for FLO investors.

Result: Fair Value of $15.5 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, powerful growth in premium brands, or a breakout success with new products, could quickly flip the story in Flowers Foods’ favor.

Find out about the key risks to this Flowers Foods narrative.

Another View: What Does the SWS DCF Model Say?

Taking a different approach, the SWS DCF model points to clear undervaluation. This method offers a more optimistic outlook compared to the analyst consensus. The question remains whether this long-term view will prove more accurate than today’s cautious forecasts.

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Flowers Foods for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Flowers Foods Narrative

If these conclusions do not quite fit your perspective or you would rather follow your own path, you can build an independent narrative from the ground up in just a few minutes. Do it your way

A great starting point for your Flowers Foods research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

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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.

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