What Does Tyson Foods Intend for Fiscal 2016?



Dividend rise declared

For 2015, Tyson Foods (TSN) had planned to give a total of $0.4 per share to shareholders in the form of dividends, implying another $0.1 per share in dividends in fiscal 4Q15 that was declared on July 30 in a press release. However, on November 19, Tyson announced a rise of 50% in the quarterly dividend, going from $0.10 to $0.15 per share on the Class A common stock payable on December 15. Tyson Foods would now pay $0.6 in dividends annually for 2015. This raised dividend will be paid on December 15, 2015, to shareholders of record at the close of business on December 1, 2015. Tyson also expects to raise its annual dividends beginning in fiscal 2017 by ~$0.10 per year.

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Tyson Foods had a dividend yield of 0.76% as of November 24, 2015. In that vein, the company’s management has been raising the dividend on a consistent basis for the last five years. Dividend rose at an average annual rate of 11.5%. The company paid $0.3 per share in dividends to shareholders in the first three quarters of 2015.

Expectations for fiscal 2016

Tyson Foods expects revenue of ~$41 billion for fiscal 2016 as its current businesses grows to balance the effect of fiscal 2015 divestitures. The company expects capital expenditures of ~$900 million and a net interest expense of $255 million for fiscal 2016.

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Segment-related guidance for fiscal 2016

Tyson expects the Chicken segment’s operating margin to exceed 10% based on expectations of lower feed costs of ~$100 million in fiscal 2016 compared to fiscal 2015. The Beef segment is expected to deliver an operating margin for fiscal 2016 in the low end of the new range. Tyson adjusted this segment’s normalized margin to now range between 1.5% to 3%, based on historical performances and future expectations. Expectations for the Pork segment’s operating margin are in its normalized range of 6% to 8% since the company anticipates the industry’s hog supplies to rise by 2% to 3% in fiscal 2016 compared to fiscal 2015.

The Prepared Foods segment is believed to deliver operating margin in the low end of the expected range of 10% to 12% in fiscal 2016 owing to lower raw material costs of ~$350 million in fiscal 2016. Since fiscal 4Q15, the company is reporting the International segment in the Other segment following the sale of its Mexico and Brazil poultry operations in fiscal 2015. The Other segment now includes foreign operations related to raising and processing live chickens in China and India and third-party merger, as well as integration costs. This segment is expected to deliver an operating loss of ~$50 million in fiscal 2016.

Tyson’s peers in the industry include General Mills (GIS), Kellogg (K), and McCormick (MKC). They reported returns of 8.7%, 3.7%, and 14.8%, respectively, as of November 24. The PowerShares S&P 500 High-Quality Portfolio (SPHQ) invests 1.3% of its portfolio in McCormick stock as of November 24.


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