B&G Foods (NYSE:BGS) has successfully increased its revenue growth at a double-digit rate over the last few quarters, thanks to its aggressive investment in growth opportunities. The company has also been paying uninterrupted quarterly dividends to investors over the previous 54 consecutive quarters. Its share price increased substantially from FY2015 to the end of 2016 before falling more than 30% in the last twelve months.

The company’s shares came under pressure after analysts started raising questions over its strategy of acquiring complex businesses. Credit Suisse said, “B&G’s acquisitions of complex businesses is seen as adding a layer of risk to the stock as the company bumps up against larger competitors with an advantage.”

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Credit Suisse has downgraded B&G Foods stock from Neutral to Underperform on the prospect for more downward guidance revisions.

The company’s strategy of expanding its penetration in key food markets has been impacting its margins and cash generating potential – which is further threatening its dividends. BGS had paid $124 million in dividends last year when its free cash flows were standing at negative $22 million. That means the company has used external sources to fund its dividends.

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Despite lower revenue, the management looks confidence in their cash generation and dividend payments. The CEO said, “We expect to deliver strong net cash from operations and free cash flow in 2018 and remain committed to our longstanding dividend policy, which resulted in nearly $124 million in cash dividends being paid to our stockholders in 2017.”

The company expects to generate record revenue of $1.74 billion in 2018 and adjusted EBITDA of approximately $347.5 million to $365.0 million. The company’s earnings could experience additional pressure, amid higher freight and transportation costs along with increasing interest expenses due to borrowing for its recent acquisitions. Overall, it will be interesting to see how the company will pay its debt installment of $150 million along with dividend payments of $124 million.

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