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On Valentine's Day B&G Foods (NYSE:BGS) will release its Q4 and full year results, and hold its conference call after the closing bell. It would be difficult for B&G to pick a more appropriate day to report earnings and hold the call. Few companies demonstrate their love for their shareholders more than B&G, a company that has focused on returning capital to shareholders and has increased its dividend four times since the end of 2010. Those increases have totaled more than 70%.

I was originally attracted to B&G in the Fall of 2007 because of the high yield of its hybrid security that was part debt security (a 12% Senior Subordinated Note) and one share of common stock with a dividend of 8.5%. The Notes were called early, and the common stock has had an outstanding, if very bumpy, run since then. In fact, one year later, the common stock had plunged 75% from $10 to a low of $2.54, and the annual dividend was cut from $0.85 to $0.68. The dividend is currently $1.16 and its current yield has declined to 3.6% with the share price near $32.

It's a stock that hasn't received too much love from the analysts. Of the five analysts at Yahoo Finance, two are rating it a buy and three are rating it a hold, with the median target price of $32 and the mean target price of $31.60. Schwab rates it a hold, and Schwab's web site shows Reuters, Credit Suisse and Ned Davis Research giving it Hold ratings and Market Edge Second Opinion® giving it a buy rating.

So, what should investors expect from B&G when it reports? Look for another strong quarter. The company continues to reap benefits from its acquisition of Culver Specialty Brands ("CSB") that was completed in Q1 of 2012 and should start showing benefits from the more recent acquisition of New York Style and Old London brands from Chipita America, Inc. that was completed in late October for $62.5 million in cash. Also, look for the company's leverage to be reduced as it paid off $101.5 million principal amount of its outstanding 7.625% debt.

Cost Savings

Because the debt reduction takes place so late in the quarter, it won't generate cost savings for Q4 or the full year of 2012, but it will provide interest savings in the future. Instead of savings, the additional charges from the call premium and the associated expenses to retire the debt will increase costs for Q4. This type of one-time expense is usually ignored by the market.

One of the more interesting aspects of the CSB acquisition was that one of the six products - Sugar Twin - had a relatively large Canadian presence. This has apparently helped B&G improve the profitability of its Canadian business. In early September at an investor conference, CEO David Wenner had this to say about Canada:

Early August, we completed a total changeover of Canadian sales and distribution infrastructure. We had done what business, our base business had done in Canada through distributors. Culver was doing it directly in the traditional warehouse to grocery warehouse method of distribution. We shifted all of our existing portfolio of sales out of this distributors into this warehouse mode and that's going to be a considerable cost savings for us by doing that. And it really gives us a meaningful base in Canada that we can now start pushing more of our base business into. So we really created a whole new infrastructure up in Canada as of August, to move forward with the entire business where opportunities present themselves.

Another large expense for B&G is wheat. This might concern some investors because of the drought in much of the US and an inability of many companies to increase prices quickly enough to offset cost increases. Earlier I noted how the stock dropped dramatically in 2008. Here's what Wenner said about costs at the conference:

If you look back, we had a lesson learnt back in 2008 where we really weren't aggressive in terms of what our positions were on buying things. So when that first wave of significant cost increases came in 2007, 2008, we were caught flatfooted in some cases and had very significant cost increases that we were not able to price fast enough to accommodate and we saw an EBITDA decline out of that. 2009, that trend continued but we were catching up in price, 2010 of course cost went down relative to the large increase. But in the last few years, 2011 this year and now looking forward in to 2013, we're very proud of the work we have done in terms of hedging costs, actually it's not truly hedging, its pricing commitments on buying commodities and really delaying cost increases number one and giving ourselves a horizon for pricing number two, and we've minimized our cost increases and really insulated ourselves from the cost increases so that when we look forward to 2013, even with the surge you have seen recently in grain prices and things like that. Today, we're forecasting a modest cost decrease in 2013, most of that coming from commodities because we've locked commodities in, in a lot of cases all the way through the fourth quarter of 2013 at favorable prices to 2012.

There are other costs, including packaging and fuel prices, that may prove to be an issue, but wheat will be under control.

A Hint At A Strong Q4?

When Wenner speaks in public - he is a frequent guest of Jim Cramer on Mad Money - he often gives hints about how the business is going. At an analyst conference last month when Wenner was discussing results, he hinted at a good Q4 when he said:

...and it's kind of unfortunate. I feel like, you know, it's only a couple of weeks until we put out our full year results, but I can't really talk about that, so I'll go back to the third quarter...

It certainly wouldn't be "unfortunate" if the company was about to release bad results.

Summary

B&G should provide investors with another quarter of excellent results. And with costs under control, Canadian opportunities, lower debt and a new accretive acquisition in Q4 2013 guidance could provide a positive surprise.

The past two years B&G has increased its dividend in Q1. While I don't expect another dividend increase quite so soon (it was just increased last quarter), B&G has surprised me in the past. Will it once again show shareholders some love on Valentine's day by announcing another dividend increase?

Source: B&G Foods Loves Its Shareholders

Additional disclosure: I have covered calls against a portion of my position.