- Flower Foods has consistently increased its revenues, earnings and dividends over the last 10 years.
- Management has split its stock six times in the last thirteen years.
- The company continues to expand nationally into the southwest and western portions of the US.
- The company's fundamentals are growing into its valuation and it may be the right time to start accumulating these securities.
Flowers Foods, Inc (FLO) produces and markets bakery foods in the United States. It operates in two segments, Direct-Store-Delivery (DSD) and Warehouse Delivery. The DSD segment produces and markets fresh bakery foods, including fresh breads, buns, rolls, tortillas, and snack cakes. This segment offers its products under the Nature’s Own, Wonder, Whitewheat, Tastykake, Bluebird, Cobblestone Mill, Merita, Home Pride, Butternut, Mary Jane & Friends, ButterKrust, Evangeline Maid, Captain John Derst’s, Barowsky’s, Mi Casa, Frestillas, Dandee, Country Hearth, Natural Grain, Leo’s Foods, and Juarez, as well as markets franchised and licensed brands, such as Sunbeam, Roman Meal, Bunny, Holsum, Aunt Hattie’s, and Country Kitchen brands. It operates 38 bakeries, as well as sells its products through DSD route delivery system to retail and foodservice clients in the New England, Florida, and California. The Warehouse Delivery segment produces snack cakes, breads, rolls, and frozen breads for national retail, foodservice, vending, and co-pack clients. It operates 8 bakeries. This segment markets its products under the Mrs. Freshley’s, European Bakers, Broad Street Bakery, Leo’s Foods, Juarez, and Tesoritos brands. The company was formerly known as Flowers Industries and changed its name to Flowers Foods, Inc. in 2001. Flowers Foods, Inc. was founded in 1919 and is headquartered in Thomasville, Georgia. (Daily Chart) (Weekly Chart)
6 July 2014
1yr Target $24.86
1yr Cap Gain 19.57%
1yr Tot Return 21.87%
Market Cap $ 4.35 Bil
3yr EarnGR 18.00%
5yr EarnGR 14.24%
3yr DivGR 19.84%
5yr DivGR 17.60%
Payout Ratio 47.05%
EPS (ttm) $1.02
EPS next yr $1.18
From that point forward, and with a new focused stately and direction, Flowers Foods went on a shopping spree that continues today.
- In 2002 Flowers purchased the Bishop Baking Company and the Ideal Baking Company.
- In 2005 Flowers purchased the Royal Cake Company.
- In 2008 Flowers purchased ButterKrust Bakery and Holsum Bakery.
- In 2009 Flowers purchased Leo's Foods.
- In 2011 Flowers purchased Tastykake.
- In 2013 Flowers purchased all the assets and trademarks of Hostess Brands.
As Flowers Foods moves into the future its intent is to expand its brands geographically across the entire United States. Today the company has a 28.6% market share in their home territory of the Southern United States and a 14.1% market share of the total US market. I believe Flowers Foods intends to expand across the entire US market and based upon their products I believe they have the possibility of eventually capturing as much as 50% of the market for prepackaged bakery goods. There's obviously plenty of opportunity for Flowers Foods to expand and capture additional revenues.
Similarly there's been a consistent rise in earnings over the last ten years, except for the year 2011. This type of consistency and improvement in revenues and earnings is not very wide spread among companies listed on the exchanges so when I find companies that are like this, I tend to take notice. I also tend to accumulate these stocks.
Dividends have also been consistently increasing over the last eight years (since 2005) at an overall growth rate in excess of 30%. Even in the last three year period the growth rate remains in the high teens. These are excellent numbers and rates that dividend growth investors usually dream about. Management has been able to maintain these increasing dividends by allowing the payout ratio to vary considerably over these time periods. Fortunately they have never allowed the payout ratio to increase to what I would consider a dangerous or extreme level so I feel that will continue at a brisk pace in the years ahead.
In response to the excellent fundamentals obtained over the years, the Board of Directors of Flowers Foods has made the decision to split the stock six times since 2001 to keep the stock affordable for the average investor. Technically this has no overall affect on the value of an investor's holdings but most investors enjoy the fact of owning more shares rather than fewer shares. And since most dividend investor's long term approach to the market is to increase the number of shares by reinvesting dividends (and hence increase future dividend payments), stock splits simply make that result happen quicker.
The following are the dates that management declared a 50% stock dividend.
- 3 for 2 split in June 2013
- 3 for 2 split in June 2011
- 3 for 2 split in June 2007
- 3 for 2 split in June 2005
- 3 for 2 split in June 2003
- 3 for 2 split in December 2001
In the chart below the lower Bollinger Band is sitting at $19.75 and I think technically this would be a great price to accumulate this stock if it were to fall back that far. This pullback would constitute a 5-6% reduction from todays stock price. Unfortunately the Average True Range (ATR) is only .33 so the probability of this stock falling this much any time soon is somewhat remote. In addition, whenever the price falls toward $20.00 buying seems to come in to support the price.
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