The board of Flowers Foods, Inc. (NYSE:FLO) has announced that it will pay a dividend of $0.24 per share on the 14th of March. This means the annual payment is 5.0% of the current stock price, which is above the average for the industry.

View our latest analysis for Flowers Foods

Flowers Foods' Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Flowers Foods' dividend made up quite a large proportion of earnings but only 72% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Earnings per share is forecast to rise by 4.6% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 83% - on the higher side, but we wouldn't necessarily say this is unsustainable.

Flowers Foods Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2015, the dividend has gone from $0.45 total annually to $0.96. This means that it has been growing its distributions at 7.9% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

We Could See Flowers Foods' Dividend Growing

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Flowers Foods has been growing its earnings per share at 8.6% a year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

Our Thoughts On Flowers Foods' Dividend

Overall, we think Flowers Foods is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The payments look pretty sustainable with good earnings coverage and a reasonable track record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Flowers Foods that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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