MGP Ingredients: A Steady Dividend Play in the Beverage and Food Ingredient Industries

MGP Ingredients (NASDAQ:MGPI) has announced a quarterly dividend of $0.12 per share, maintaining its annual dividend of $0.48 per share with a yield of 1.47%. This consistent payout is a testament to the company's strong financial performance and commitment to returning value to shareholders. In this article, we will explore the factors driving MGP Ingredients' dividend policy, its historical dividend payouts, and how its dividend yield compares to its peers in the beverage and food ingredient industries.



MGP Ingredients' dividend payouts have been consistent and gradually increasing over time. The company has maintained a quarterly dividend of $0.12 per share since the third quarter of 2020. Prior to this, the company had increased its dividend payout over time, with a quarterly dividend of $0.10 per share in 2019 and $0.08 per share in 2018. This historical data indicates that MGP Ingredients has been gradually increasing its dividend payout over the years, with the current payout of $0.12 per share being the highest and most consistent in recent history.

The primary factors driving MGP Ingredients' decision to maintain or increase its dividend payout are:

1. Strong Financial Performance: Despite industry-wide challenges, MGP Ingredients has reported strong financial performance. In the fourth quarter of 2024, the company's adjusted net income decreased by only 6% compared to the previous year, and adjusted EBITDA decreased by 9%. This demonstrates the company's ability to generate consistent cash flows, which can be used to fund dividend payments.
2. Consistent Dividend History: MGP Ingredients has a history of consistent dividend payments, with a quarterly dividend of $0.12 per share since 2020. This consistency indicates the company's commitment to returning capital to shareholders and maintaining a stable dividend policy.
3. Strong Balance Sheet: The company's net debt leverage ratio stands at approximately 1.5x as of December 31, 2024, indicating a strong balance sheet and the ability to manage its debt obligations. A strong balance sheet allows MGP Ingredients to maintain its dividend payout while also investing in growth opportunities.
4. Branded Spirits and Ingredient Solutions Growth: MGP Ingredients' branded spirits and ingredient solutions segments have shown growth potential. The company's premium plus portfolio, led by Penelope, has outpaced category growth in 2024. Additionally, the Ingredient Solutions segment has shown sequential improvement in sales and gross margin, reinforcing the company's belief in the long-term growth potential of its specialty wheat ingredients platform.



MGP Ingredients' dividend yield of 1.47% is relatively low compared to its peers in the beverage and food ingredient industries. For instance, Anheuser-Busch InBev (ABI) has a dividend yield of around 3.5%, while Archer Daniels Midland (ADM) offers a yield of approximately 2.5%. This lower yield may indicate that MGP Ingredients is prioritizing reinvestment in its business for growth over distributing cash to shareholders through dividends.

However, it is essential to consider that MGP Ingredients has a strong track record of dividend growth. The company has increased its annual dividend for the past 15 consecutive years, with a compound annual growth rate (CAGR) of approximately 10% over the past five years. This consistent dividend growth demonstrates the company's commitment to returning value to shareholders and may suggest that the current low yield is a temporary phenomenon.

Moreover, MGP Ingredients' low dividend yield may be offset by its strong earnings growth potential. The company's branded spirits and ingredient solutions segments have shown promising growth, and its strategic initiatives, such as the expansion of its premium plus portfolio and the optimization of its cost structure, could drive future earnings growth. As a result, investors may be willing to accept a lower dividend yield in exchange for the potential for higher capital appreciation.

In conclusion, MGP Ingredients' decision to maintain or increase its dividend payout is driven by its strong financial performance, consistent dividend history, strong balance sheet, and growth potential in its branded spirits and ingredient solutions segments. While the company's dividend yield is lower than that of its peers, its history of dividend growth and strong earnings growth potential may make it an attractive investment option for investors seeking a combination of income and capital appreciation. However, investors should carefully consider their individual investment goals and risk tolerance before making a decision.