As investors, it’s prudent to purchase shares in businesses that have long-term staying power. This provides the sleep-well-at-night level of comfort that comes from knowing your stock will still be doing well 5,10 or even 20 years from now.

Flowers Foods (FLO) definitely fits this bill. A bakery business with a market capitalization of ~$4 billion, this company is a darling for dividend growth investors.

It’s not hard to see why – with a dividend yield of >3% and 29 years of steady or increasing dividends, this company has a proven track record of growing income for shareholders.

Flowers Foods is a member of the Dividend Achievers Index, a group of elite companies with 10+ years of consecutive dividend increases.  You can see all 273 Dividend Achievers here.

On November 9th, Flower Foods reported earnings for the twelve-week period ending October 8, 2016. This article will cover that earnings release in detail, and discuss the investment prospects of this company.

On December 9th, Flowers Foods also announced some very favorable news for investors. Namely, they have settled a class-action lawsuit filed in 2013 in the state of North Carolina that has had investors worried for years now. The settlement was much smaller than expected, and the favorable economic conditions that led to this lawsuit are permitted to stay intact. This announcement will also be discussed in this article.

Business Overview

Key Stats:

The origin of Flowers Foods can be traced back to 1919 when two brothers, William Howard and Joseph Hampton Flowers, opened the Flowers Baking Company in Thomasville, Georgia. The company grew rapidly through serial acquisitions until, in 1968, the company went public as Flowers Industries.

After a ten-year transformational period starting in the mid-1990s, Flowers Industries became Flowers Foods and is now a force to be reckoned with in the baked goods industry. Their flagship product, Nature’s Own, is the #1 bread brand in the US.

Flowers Foods does a fantastic job outlining their business operations with the following summary from their 2016 investor fact sheet.

Source: Flowers Foods Investor Fact Sheet

One of the major selling points of Flowers Foods is the brand equity that their company owns. Their portfolio of products contains many household names, as illustrated in the following picture.

Source: Flowers Foods Investor Fact Sheet

Historically speaking, Flowers Foods has allocated a lot of their capital towards financing acquisitions. Similar to Alimentation Couche-Tard, FLO operates in an extremely fragmented industry that lends itself very well to acquisition-based growth.

Source: Flowers Foods Investor Fact Sheet

Now that we have a sense of the operations of this company, let’s dive into their third quarter financial performance.

Financial Performance

As I’ve already mentioned, on November 9th Flowers Foods reported third quarter financial results for the twelve-week period ending October 8, 2016. Here are a few financial performance metrics as highlighted in their press release.