Sanderson Farms' (SAFM) Shareholder-Friendly Moves Look Solid
Sanderson Farms, Inc. SAFM is undertaking efforts to enhance its capacity, which are yielding results. Moreover, the company’s solid product base along with reduced feed costs is an upside. Apart from these, it is committed toward boosting shareholders’ value. Over the last several years, this poultry-producing company has paid out dividends regularly to improve shareholder returns.
Incidentally, Sanderson Farms recently delighted investors by announcing a dividend hike. The company took its quarterly dividend to 44 cents per share, reflecting a 37.5% raise from the prior rate of 32 cents. Management will pay the increased dividend on Oct 20, 2020 to shareholders of record as of Oct 6. Impressively, shares of the company are up 1.7% since the announcement on Sep 24.
The hiked dividend represents an annual increase of 48 cents per share, taking the new rate to $1.76 per share. The company currently has a dividend yield of 1.1%. Well, dividend payouts are one of the biggest enticements for investors and Sanderson Farms is committed to boosting shareholders’ wealth.
Certainly, Sanderson Farms’ healthy financial position and robust growth efforts permit it to continually return wealth to its shareholders. Notably, the company’s cash position of $66 million remains sufficient to meet current lease liabilities of $14 million as of Jul 31. Further, its long-term debt of $95 million declined 52.5% on a quarter-on-quarter basis as of Jul 31. At the end of the third quarter of fiscal 2020, the company’s debt-to-capitalization ratio was 0.06 compared with the industry’s ratio of 0.35.
Other Factors Working in Favor of Sanderson Farms
Sanderson Farms’ efforts to expand capacity bode well. In this regard, the company constructed a new poultry processing complex in Tyler, TX. The facility, which started operations during first-quarter fiscal 2019, includes a feed mill, hatchery, waste water treatment facility and a processing plant with the capacity to process 1.3 million chickens per week. Impressively, this expansion is already yielding results for the company.
Further, Sanderson Farms is gaining from lower costs of soybean meal and corn that are part of the company’s primary feed ingredients. During the fiscal third quarter, Sanderson Farms’ average feed costs per pound for poultry products declined 5.6% year over year. Costs of corn meal and soybean meal decreased 9.6% and 3.2%, respectively, in the quarter. In fact, management anticipates feed grain costs to decline 83 cents per pound of chicken processed year over year in fiscal 2020.
Apart from these, Sanderson Farms has been strengthening its product portfolio by expanding its vast product pipeline. The company is known for its processed and prepared chicken products available in varied sizes that are also sold in foreign markets like Mexico, Middle East and Central Asia.
We note that, shares of this Zacks Rank #3 (Hold) company have gained 3.3% in the past three months compared with the industry’s growth of 3%.
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TreeHouse Foods THS, which carries a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 7.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Helen of Troy HELE carries a Zacks Rank #2 and has a long-term earnings growth rate of 6.7%.
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