Flowers Foods (NYSE: FLO), the baker behind Nature's Own and Dave's Killer Bread, halved its dividend in May 2026, yet the stock still yields about 8.4% at $5.98. Special-situations investor Colin King argues that capital-constrained food companies like Flowers should cut even deeper, take the payout to zero and push leverage down to 2 times. The next checkpoint is Flowers' third-quarter report, which data providers expect around November 5, 2026.
This is journalism and commentary, not investment advice. We hold no position unless stated.
Key facts
- Ticker and exchange: Flowers Foods, Inc., FLO, New York Stock Exchange.
- Situation type: dividend and deleveraging debate at a junk-rated food company.
- The call: Colin King (@valuedontlie) said on October 14, 2026 that some dividend cutters should cut deeper; a skeptical lean on Flowers' payout policy, with no stated position.
- Price: $5.98 at the October 19, 2026 close, down 45% from $10.88 at the end of 2025.
- Dividend: $0.50 a year ($0.125 a quarter) since the May 21, 2026 reset, an 8.4% yield at $5.98.
- Debt: $1.69 billion of debt and $52.8 million of cash at July 18, 2026, with $399.9 million of the debt classified as current.
- Catalyst: third-quarter 2026 results, estimated for November 5, 2026 but not yet confirmed by Flowers Foods.
- Main risk: bread volumes keep shrinking; Flowers Foods' volume fell 5.8% in the second quarter.
Is Flowers Foods a good bet right now?
The case for Flowers Foods is price. At $5.98 and about 212.5 million diluted shares, the equity is worth roughly $1.27 billion, by our math, versus 2026 adjusted EBITDA guidance of $453 million to $481 million.
The case against is the trend. Second-quarter sales fell 4.0% to $1.193 billion, adjusted EBITDA fell 19.2% to $111.3 million, and Flowers Foods cut its 2026 adjusted EPS guidance to $0.75 to $0.85, per the Q2 release.
Why are investors bearish on Flowers Foods?
- Shrinking volume. Branded Retail volume fell 7.6% in the quarter ended July 18, 2026, offset only partly by 3.8% higher pricing and mix.
- Junk ratings. S&P Global cut Flowers Foods to BB+ from BBB- in September 2026 with a negative Outlook, and Moody's assigned a Ba1 corporate family rating on September 11, 2026.
- Leverage is not falling yet. Moody's put gross debt at 3.6 times EBITDA for the 12 months to July 18, 2026 and expects about 3.7 times by year-end.
- The payout still eats the cash. At $0.50 on roughly 212 million shares, the dividend costs about $106 million a year, by our math. Moody's projects free cash flow of about $100 million to $125 million in both 2026 and 2027.
Who's making this call and why?
Colin King is a special-situations investor who publishes stock write-ups and a newsletter and posts as @valuedontlie. On October 14, 2026 he wrote that consumer-goods companies with hefty dividends look capital constrained: "seeing some dividend cuts but some of them should be cutting even deeper."
King added that such companies should take the dividend to zero, get leverage to 2 times and revisit payouts after the stock multiplies. The post names no ticker, but its chart shows dividends per share falling to an estimated $0.62 from $0.98, a drop in line with Flowers' May reset. Later that day King answered "yep" when a reader asked whether a deleveraging chart he posted on October 13 was Flowers Foods.
At the $467 million midpoint of EBITDA guidance, 2 times means about $934 million of net debt, versus about $1.63 billion at July 18, 2026, by our math: roughly $700 million to retire.
Track record. In our tracking, Colin King is 11-8 (a .579 win rate) on 19 calls scored at 180 days against the S&P 500, with an average edge of +35.1 percentage points, ranked 5th on the career table. One outlier drives that average; his median edge is +4.2 points. See the scoreboard.
Other voices:
- Wagie Capital (@WagieCapital), a pseudonymous long/short commentator, wrote after the Moody's and S&P downgrades: "Surely they have to cut the dividend again."
- Alan Galecki (@Fin_Eng_Net), who writes the Financial-Engineering.net newsletter and sells a paid tier, argued that Americans are eating less loaf bread: "Cut to zero looming."
Who disagrees?
- Management. In the Q1 release, CEO Ryals McMullian said "we expect dividends to remain an important component of our overall shareholder value proposition." The company targets leverage below 3.0 times.
- A value fund. Buyside Digest reported that JB Global Capital bought Flowers Foods at $8.50, added at $6.80 and made it the fund's second-largest position, with a sum-of-the-parts fair value of $13 to $14, the fund's own estimate. The fund described Flowers as "a low-risk category at roughly half of asset value."
- Liquidity is fine for now. Moody's rates Flowers' liquidity SGL-2, citing a $500 million revolver maturing in February 2030.
- The first cut is working. Dividends paid fell to $26.6 million in the second quarter from $52.4 million a year earlier, and Flowers Foods repaid a net $70.0 million of debt in the first 28 weeks of 2026.
What are the key facts to verify?
- The Q2 2026 release for guidance, cash flow and the balance sheet.
- The Q1 2026 release for the dividend reset to $0.50 a year.
- The Moody's action for leverage and free cash flow forecasts.
What would prove it right or wrong?
Right: third-quarter volume keeps falling, leverage drifts toward Moody's 3.7 times, S&P follows through on its negative Outlook, or the board cuts the dividend again.
Wrong: the second-half sales pickup that guidance assumes shows up, leverage moves below 3.0 times with the $0.50 dividend intact, and the 8.4% yield shrinks because the share price rises.
This is journalism and commentary, not investment advice. We hold no position unless stated.