Cal-Maine Foods (NASDAQ:CALM) Will Pay A Larger Dividend Than Last Year At $3.46

Simply Wall St · 04/12 13:21

The board of Cal-Maine Foods, Inc. (NASDAQ:CALM) has announced that it will be paying its dividend of $3.46 on the 15th of May, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 1.9%, which is below the industry average.

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Cal-Maine Foods' Future Dividends May Potentially Be At Risk

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, Cal-Maine Foods' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to fall by 67.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 116%, which could put the dividend in jeopardy if the company's earnings don't improve.

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NasdaqGS:CALM Historic Dividend April 12th 2025

View our latest analysis for Cal-Maine Foods

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was $0.727 in 2015, and the most recent fiscal year payment was $1.89. This works out to be a compound annual growth rate (CAGR) of approximately 10% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Cal-Maine Foods has seen EPS rising for the last five years, at 52% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Cal-Maine Foods Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Cal-Maine Foods is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 3 warning signs for Cal-Maine Foods you should be aware of, and 1 of them doesn't sit too well with us. Is Cal-Maine Foods not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.