Flowers Foods (NYSE:FLO) Has Affirmed Its Dividend Of $0.2475

Flowers Foods, Inc.'s (NYSE:FLO) investors are due to receive a payment of $0.2475 per share on 12th of December. This makes the dividend yield 8.7%, which will augment investor returns quite nicely.

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Flowers Foods' Future Dividends May Potentially Be At Risk

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Flowers Foods' profits didn't cover the dividend, but the company was generating enough cash instead. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

The next 12 months is set to see EPS grow by 10.7%. If the dividend continues on its recent course, the payout ratio in 12 months could be 102%, which is a bit high and could start applying pressure to the balance sheet.

Check out our latest analysis for Flowers Foods

Flowers Foods Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the annual payment back then was $0.53, compared to the most recent full-year payment of $0.99. This implies that the company grew its distributions at a yearly rate of about 6.4% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

Flowers Foods' Dividend Might Lack Growth

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Flowers Foods has grown earnings per share at 15% per year over the past five years. Although per-share earnings are growing at a credible rate, the massive payout ratio may limit growth in the company's future dividend payments.

Our Thoughts On Flowers Foods' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Flowers Foods' payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 3 warning signs for Flowers Foods that investors need to be conscious of moving forward. Is Flowers Foods not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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