What happened

Shares of food maker B&G Foods (NYSE:BGS) rose about 20% in May, according to data from S&P Global Market Intelligence. That easily beat the S&P 500 Index's gain of roughly 5%. What was most telling, however, was that B&G's shares really took off after it reported earnings in the early part of the month.

So what

B&G's core business is basically buying smaller, up-and-coming brands and brands that larger companies no longer want. It uses its relationships with retailers to increase distribution and attempts to innovate with the brands, like creating new variations of stale products. The efforts to slow the spread of COVID-19 weren't expected to be a huge impediment to the company's business. However, it still wasn't clear how a collection of smaller brands would hold up. The answer came on May 5, when the company reported first-quarter earnings.

A person pushing a shopping cart through a store.

Image source: Getty Images.

Sales were up an impressive 8.9% year over year, driven by an acquisition. However, B&G noted that "base" sales were up 4.3%. That's a very strong number in the packaged foods space. Management explained that after a slow start to the quarter, sales started to increase materially in the second half of March as consumers began cooking at home more. The strength continued into April as well, with the company's net sales up 60% year over year in the month. That should lead to another strong earnings release in the second quarter. Investors reacted as you might expect: by pushing B&G's shares smartly higher.

Now what

Dividend-focused investors should take this very positive news with a grain of salt. B&G's model is important, because it's based on acquisitions. As it has cobbled together its portfolio, it has also materially leveraged its balance sheet. The company's debt-to-equity ratio is a hefty 2.5 times. And while it manages to cover its trailing interest expenses by roughly 2.1 times, that's not actually a great number in the packed food space. The generous 7.9% yield comes with material risks that have nothing to do with COVID-19. B&G is only appropriate for more aggressive investors.