Dear Mr. Berko: Your buy, sell or hold thoughts on B&G Foods and why. Do directors of public corporations earn their pay? -- N.L., Jonesboro, Arkansas
Dear N.L.: Cream of Wheat is one of my favorite morning foods, and so is McCann's Irish oatmeal when I toss a fistful of raisins in the bowl. B&G’s a $1.6 billion company making, selling and distributing some 50 shelf-stable products, including frozen and canned vegetables, meats, beans, salsa, syrups, dressing and the like.
Thank you, B&G Foods (BGS-$22), for all-fruit Polaner jelly, Green Giant, yummy SnackWell's, Mrs. Dash, Accent, Durkee, LeSueur and myriad other products that have earned a spot in our kitchen during the last 50 of the company’s 120 years. And thanks to the wholesalers, supermarkets, mass merchants and warehouse clubs for bringing these products to us, including puffed corn, dry soups, rice snacks, nut clusters, hot sauces, maple syrups and delightful pizza crusts.
I like this company intensely, even though it missed consensus by 4% last quarter. I like its dividend that’s increased yearly from $0.55 in 2008 to $1.90 this year, and I like the 8.5% yield. I like the fact that BGS has increased earnings in 11 out of its last 13 years. There was a slight revenue dip last year as BGS sold its Pirate Brands to Hershey for $420 million.
I like BGS because net profit margins, according to several investment services, continue to improve and are projected to exceed 10.5% in the coming few years. Morningstar thinks BGS's trading price is a bit too high, S&P is neutral, while Credit Suisse rates BGS as underperform. On the other hand, Seeking Alpha, Zacks, Blackrock, Vanguard and Principal are significant shareholders, believing BGS will nicely increase its 2020 through 2023 revenues, including net profit margins, earnings and dividends. In the last three months insiders purchased 102,000 shares and sold 13,000 shares.
I think B&G is a fairly good long-term investment. Short-term price action may be wobbly and nothing to write home about. This mid-cap issue traded in the mid-$50s back in 2016 when the dividend was $1.73, revenues were $1.4 billion and net profit margin was 9.4%. Value Line’s Kenneth Nugent believes BGS can be a $70 stock by 2023-2024. BGS officers and directors agree: The president bought 44,000 shares, the EVP and COO bought 33,000 this year, and even the general counsel bought 10,000 shares.
If you want to buy 300 shares as a long-term investment, I’ll put my imprimatur on BGS. BGS could be a slow winner, and while you’re waiting a few years for potential capital gains, you’ll be pleased as a pasha with a nice quarterly dividend that should be reinvested. Despite the drop in value to $21 in the last year, many believe that in the coming two to three years BGS will make a positive contribution to your total wealth.
Being a director of a group of mutual funds or a public corporation is a sinecure that requires little work and is usually handed out to lucky old dodos and friends in the industry as a reward for service. They get paid exceptionally well, often $200,000 annually (per board position) plus perks, travel costs and per diems while attending meetings. Many of these old guys are on six to 10 boards and never worry about earning a living for the remainder of their lives.
Most directors are useless window dressing. Did the boards of GE, JCPenney, Macy’s, Theranos, Sears and many others keep their companies solvent? I wouldn’t waste a vote on those coiffed meatheads wearing $3,000 suits.
(Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at email@example.com.)