I’ll admit, back in March, when the pandemic exploded and we started shutting the world down, I was terrified.
But it wasn’t the virus I was concerned with. It was the potential loss of my livelihood. With the stock market swirling down the drain, I envisioned myself waiting in a breadline. I had a lot of sleepless nights.
My brother-in-law was a lot more relaxed. We were stuck under quarantine together for a full month on the farm in Peru, so we had plenty of time to talk.
He owns a successful farm supply business in South America and, apart from a few minor supply disruptions, his operations barely skipped a beat.
“People still have to eat, man,” he said with a shrug.
This brings me to my dividend stock of the week, Flowers Foods Inc. (NYSE: FLO).
Flowers isn’t a farming company; they sell packaged bakery products. But the idea is the same. People have to eat. And if I had ended up in one of the breadlines from my quarantine nightmares, chances are good I would be served a Flowers product.
Flowers sells breads, buns, rolls, snack cakes and tortillas, and you probably recognize some of its top brands:
- Nature’s Own.
- Wonder Bread.
- Blue Bird.
Come what may in 2020 and beyond, Flowers will be there, baking bread. It’s as close to an apocalypse-proof business as you can find.
And Flowers Foods dividend is a fantastic payer. FLO pays a current yield of 3.2%. And it’s raised its dividend every year since 2013. Over the past five years, it’s raised its dividend at an 8.7% annualized clip, well ahead of the rate of inflation.
Flowers Foods Dividend and Stock Rating
Let’s see how it stacks up based on Adam O’Dell’s Green Zone Ratings system.
Flowers Foods has an overall rating of 84, making it a Strong Bullish stock in the model. Based on historical precedent, Strong Bullish stocks like Flowers are expected to beat the market by three times over the following 12 months.
Let’s drill down to see what factors really drive Flowers’ rating.
Volatility — Volatility isn’t something you want to see in a core stock holding. Over time, low-volatility stocks tend to outperform high-volatility stocks. Flowers rates a 98 here, implying it’s less volatile than all but 2% of stocks in our universe. Given that Flowers sells an essential product — bread — this isn’t a surprise.
Quality — Flowers also rates highly in quality at 77. Flowers has a modest debt load it can easily service, and it consistently turns a profit. It‘s that simple.
Growth — For a stodgy old bread company, Flowers also rates highly based on growth at 63. It’s not growing like a high-flying tech stock, but it’s still solidly bullish. And that’s a great sign for Flowers Foods dividend as well.
Momentum — It’s also surprising to see a stock this conservative rank well based on momentum, but Flowers scores a 61 here. We measure momentum based on multiple time frames, and Flowers wins here by virtue of its consistency. Flowers has been in a solid uptrend since 2016.
Value — Flowers isn’t a great bargain, but it’s by no means expensive. It rates a 55 on value, putting it right in the middle of the pack. That’s fantastic. Generally, stocks that rate well based on growth, quality and momentum rate low based on value. But today, we’re not paying much of a premium at all to get a truly fantastic company.
Size — If Flowers has one weakness, it’s size. While not a mega-cap, Flowers is certainly a large-cap stock with a size rating of 39. Don’t expect a small-cap bump.
Bottom line: Flowers is not a sexy stock. It sells loaves of bread, for crying out loud.
But it’s a solid dividend payer and nice addition for any long-term portfolio. The fact that Flowers Foods stock is positioned to triple overall market gains over the next 12 months is just icing on the Tastykake.
Money & Markets contributor Charles Sizemore specializes in income and retirement topics. Charles is a regular on The Bull & The Bear podcast. He is also a frequent guest on CNBC, Bloomberg and Fox Business.
Follow Charles on Twitter @CharlesSizemore.