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Cal-Maine’s Dividend Continues to Shrink Alongside Profit

July 25, 2011 | About:
Cal-Maine Foods (CALM) reported fourth quarter headline figures that beat Wall Street’s estimates this morning, but the company’s gross margins — and as a result, dividends — continue to be decimated by higher feed costs.

The country’s largest producer and distributor of eggs earned $0.30 per share on $242.4 million in revenue, just edging the consensus profit view ($0.29 per share) despite easily beating the average sales estimate ($224.7 million). Revenue topped last year’s Q4 figure by 9%, aided by a higher retail demand for eggs. But the sales boost was more than offset by escalating feed costs, which rose 37% year-over-year, causing net income to decline 65%.

Cal-Maine employs a variable dividend policy, in which each quarterly dividend is equal to 1/3 of the net income generated during the prior period. This has not worked out well for investors recently. In accordance with the policy, the company declared a dividend of just $0.102 per share within today’s release, or 65% less than it paid during the same period last year. The last four dividends declared by Cal-Maine have totaled just $0.851 per share, or 31% less than the $1.228 paid during the previous four quarters.

Shares of CALM sunk as low as $31.00 (-12.70%) during the opening minutes of Monday’s session, before rapidly recovering to Friday’s closing price of $35.51. At its current level, the stock carries a 2.40% yield based on its last four dividends declared. Analysts expect the company to earn $2.45 per share during its fiscal 2012, which would produce $0.8167 per share in dividend income and a 2.30% yield.

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