B&G Foods (BGS) Dividend Cut Again Because of Debt

B&G Foods Corporation (BGS) cut its dividend due to debt, leverage, and poor operating results. Notably, the firm had a significant dividend reduction in November 2022. Weak operating and financial results, soft sales, and negative earnings for a longer than expected time have taken a toll on the company. The firm’s dividend has not been increased in a decade and B&G Foods is not a dividend growth stock.

The share price has exhibited a declining trend for many years with little interruption. Investors are arguably not currently interested in this equity and sold this dividend stock due to concerns about net debt, operating results, leverage, and two dividend cuts in a relatively short span of time. Moreover, inflationary trends and continued economic uncertainty with additional pressures from the regional conflict in the Middle East makes the timing of a recovery unclear. Hence, the company is at risk for another reduction.

Overview of B&G Foods 

B&G Foods, Inc. was founded in 1889 and is headquartered in Parsippany, New Jersey. The firm was acquired by investors in 1996 and the common stock started trading in 2006. Today, it is a consumer packaged foods company focusing on shelf-stable and frozen foods. It operates through three segments: Specialty, Meals, Frozen & Vegetables, and Spices & Flavor Solutions. The corporation owns dozens of brands in various end markets. Its familiar brands include Dash, Crisco, Cream of Wheat, Ortega, Polaner, Spice Islands, Polaner, New York Flatbreads, and more.

Total revenue was $1,829 million in fiscal 2025 and $1,812 million in the past twelve months.

Dividend Cut Announcement

During the first quarter of FY 2026, on Monday, May 12th, B&G Foods Inc. (BGS) cut its dividend. The company’s quarterly dividend rate was $0.19 per share before the announcement. The dividend is now $0.095 per common share, a 50% reduction. In the announcement on May 12th, the company’s President and CEO stated,

“The reduction in our dividend rate approved yesterday by our Board of Directors, which follows a series of divestitures and portfolio reshaping, is consistent with our commitment to reduce our leverage and is designed to position us well for the refinancing of upcoming debt maturities and future growth through accretive acquisitions. The new dividend rate, while still paying a substantial portion of our excess cash to stockholders, provides for a substantial portion of our excess cash to be retained in our business for debt repayment or other business needs that may arise. We believe that the new dividend rate is sustainable in both the short- and long-term and is consistent with our company’s desire to provide stockholders with an attractive and reliable return on their investment.”

In the earnings results release, the company stated,

“…the current intended dividend rate for the Company’s common stock has been reduced from $0.76 per share per annum to $0.38 per share per annum. Based upon the new current intended dividend rate of $0.38 per share per annum and the current number of outstanding shares, the Company expects the Company’s aggregate dividend payments to be approximately $46.0 million in fiscal 2026 and $30.8 million in fiscal 2027.”

Later, in the second quarter earnings call transcript, the CFO stated,

“Following the completion of the Don Pepino, Le Sueur U.S. and Green Giant U.S. divestitures and the College Inn and Kitchen Basics acquisition, our Board has concluded that an adjustment to our intended dividend rate was appropriate. On an annualized basis, the reduction in dividend is expected to provide an additional $30 million or so, which we intend to use to repay long-term debt and for other business purposes, which we expect will further accelerate the reduction in our leverage ratio.”

Effect of the Change

By cutting the dividend by 50%, B&G Foods desired to decrease its quarterly and annual dividend distributions and allow it to repay debt and direct money to other business needs. Apart from that, the company is suffering from a lower top-line and losses because of too much debt and consumer weakness. Additionally, inflation and overall economic uncertainty have impacted results. Another consideration is that the balance sheet is very leveraged with low interest coverage. 

The company’s dividend rate has been constant since the end of 2022, when it last cut the dividend, so it did not have a streak of increases. The firm was not a dividend growth stock. The result is that less free cash flow (“FCF”) is required for the dividend distribution, allowing the company to direct cash flow to debt reduction.

Challenges

B&G Foods is facing a challenging business environment because of consumer weakness. Many consumers are holding back on spending because of inflation, which is outpacing salary wage growth. Additionally, the balance sheet is leveraged, and interest coverage is low.

Inflation and Consumers

Inflation affects both B&G Foods’ input costs and consumers. The company’s input costs are rising due to inflationary trends. The cost of freight, packaging, diesel, labor, and commodities is increasing faster than the firm can raise prices. Apart from this, consumers are spending less because incomes are not keeping up with inflation. As a result, they may trade down for grocery purchases. The net result is that the top line is pressured and operating margins have fallen from 11.6% in fiscal 2023 to 10.6% in FY 2025.

Debt and Leverage

B&G Foods is a leveraged firm with about $1.993 billion in net debt. It currently has approximately 1.28 times interest coverage and a leverage ratio of about 7.15 times. Notably, both of these values indicate that the company has too much debt. A consumer packaged food company’s leverage ratio should be 2.5X or less. Moreover, it has a non-investment-grade credit rating of B-/B3 due to high leverage, weaker operating results, use of debt to pay the dividend, and inflationary trends.

Dividend Safety

Because of weaker revenue and earnings per share (“EPS”) losses, B&G Foods’s dividend safety metrics were poor. EPS has been negative for four years out of the past ten and four of the last five. They peaked at $3.26 in FY 2017 and were a loss of ($0.54) in FY 2025. On the positive side, consensus analyst estimates indicate $0.60 per share in fiscal 2026.

As shown in the chart below from StockRover*, the dividend was well over 10% for many quarters. High values over this quantity are usually associated with companies facing operating and financial difficulties. Notably, the yield is still elevated even after slashing it by 50%. Also, it was much greater than the 4-year average of 11.66%. After reducing the dividend by 50%, the forward dividend yield is now around 9.41%. The quarterly distribution rate is $0.095 per share. However, the yield is still substantially greater than that of the S&P 500 average.

The annual dividend now requires about $31.2 million ($0.39 yearly dividend x 80 million shares), compared to $60.6 million in FY 2025. The lower rate will improve the payout ratio assuming positive earnings. The payout ratio was negative for the past four years, indicating that earnings were not covering the dividend. Additionally, FCF had declined to $71 million in fiscal 2025 from $222 million in FY 2023. We expect the yearly difference in cash flow requirements to allow B&G Foods to primarily pay down debt.

Although the dividend is in a better position and more secure now, the firm’s dividend is still not entirely safe, as demonstrated by the weak credit rating, soft revenue, negative EPS, and declining FCF. Furthermore, persistent inflation and economic uncertainty are causing challenges. Hence, another dividend cut may occur.

Subsequently, we view the equity in jeopardy for another dividend reduction unless results improve and inflationary trends subside.

Final Thoughts on B&G Foods (BGS) Dividend Cut

B&G Foods cut its dividend for multiple reasons. However, to summarize, it has too much debt, high leverage, not enough interest coverage, soft sales, negative EPS, pressured operating margins, and declining FCF. The combined effect has been exacerbated by inflationary trends and economic uncertainty. Moreover, the recent regional conflict in the Middle East will likely impact margins due to higher input costs.

The collective effect resulted in declining dividend safety metrics. As a result, B&G Foods cut its dividend. However, we view the company as at risk for another significant decrease, despite the cuts and brand divestments. Notably, this is the second dividend cut since 2022 and as I previously suggested, investors following a dividend growth strategy should probably look elsewhere.

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