My Food Bag Group: A Dividend Dynamo with Room to Grow

Why This High-Yield Stock Could Be Your Next Dividend Champion

My Food Bag Group (NZSE:MFB) has quietly emerged as a compelling income play in the consumer goods sector, offering an attractive 8.19% dividend yield while demonstrating disciplined financial stewardship. With a payout ratio of just 26%, the company's dividend appears sustainable even amid modest earnings growth. But what truly sets MFB apart is its ability to balance shareholder returns with strategic investments in long-term growth.

EPS Growth Fuels Dividend Confidence

The company's earnings per share (EPS) rose to NZ$0.03 for fiscal 2025, a 20% beat over analyst expectations and a 20% increase from the prior year's NZ$0.025. This upward trajectory, driven by cost efficiencies and stabilized customer numbers, provides a solid foundation for dividend sustainability.

While quarterly EPS data for Q1 2025 isn't explicitly disclosed, the first half of FY2025 (ending September 2024) saw net profit after tax (NPAT) climb to NZ$3.0 million from NZ$2.5 million a year earlier, signaling consistent progress. The interim dividend of NZ$0.0065 per share, fully imputed and paid in December, aligns with the company's conservative payout strategy.

Payout Ratio: A Cushion Against Volatility

With a payout ratio of 26%, MFB's dividends are comfortably covered by earnings, even as it retains ample capital for reinvestment. The cash payout ratio of 31.4% further underscores the company's ability to fund dividends through operating cash flow—a critical buffer in uncertain economic environments.

Compare this to competitors in the meal-kit and grocery delivery space, where payout ratios often exceed 50%, leaving little room for error. MFB's discipline here positions it as a safer, more predictable income generator.

Strategic Initiatives: Fueling Future Growth

The dividend isn't just about today's returns—it's a reflection of MFB's long-term vision. Recent moves like the launch of the My Food Bag Shop (an online grocery platform) and user experience (UX) upgrades aim to expand its customer base and reduce reliance on volatile active subscriptions. These initiatives, coupled with a NZ$2.1 million debt reduction over the past year, signal management's focus on sustainable scaling.

Why Act Now?

• High Yield, Low Risk: An 8.19% dividend yield with a payout ratio under 30% is rare in a world of stagnant interest rates.
• Structural Improvements: Debt reduction and operational efficiencies create a stronger balance sheet.
• Untapped Growth: The My Food Bag Shop could unlock new revenue streams, boosting EPS further.

Risks to Consider

No investment is without risk. The company faces headwinds from a saturated meal-kit market and rising labor costs. However, its recent customer retention metrics and the success of the My Food Bag Shop suggest it's adapting effectively.

Final Take

My Food Bag Group isn't just a dividend play—it's a story of operational resilience and strategic foresight. With a payout ratio that leaves room for growth, a yield that outpaces most fixed-income alternatives, and initiatives aimed at unlocking new markets, MFB offers a compelling risk-reward profile. Investors seeking income with upside potential should act swiftly: at current levels, this stock could be primed for a breakout.

Bottom Line: For income-focused investors, MFB checks all the boxes—sustainable dividends, improving fundamentals, and a roadmap for growth. Don't miss the boat on this undervalued gem.

This article is for informational purposes only. Always conduct your own research or consult a financial advisor before making investment decisions.