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Sanderson Farms Gets New Poultry Complex, Pays Out Dividend

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Dividend paid

On January 21, 2016, Sanderson Farms (SAFM) announced a regular quarterly dividend of $0.22. The dividend was paid on February 16, 2016, to shareholders of record on February 2, 2016. SAFM has a dividend yield of ~1.0% as of February 25. The company’s dividend has risen at an average annual rate of 7% over five years. For 2015, the company paid $31.1 million in dividends, or $1.38 per share, to shareholders.

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Update on new facility in Palestine

Sanderson Farms (SAFM) has completed construction of its new Palestine facility in Texas and is moving toward full production. The facility is a $140 million complex built due to increased consumer demand for affordable and lean protein products. The complex includes a feed mill, hatchery, poultry processing plant, and wastewater facility. SAFM expects to begin the second shift in this facility in April and anticipates the plant to reach full production by fiscal 4Q16. Sanderson expects the plant to process 1.3 million chickens per week at full capacity, which will ultimately increase overall production by ~16%.

Expectations for this facility also include creating opportunities for the company’s employees, producing high-quality products for customers, and adding value for the company’s investors and shareholders. The company also mentioned that construction of its new St. Pauls, North Carolina, complex is on schedule. It expects to open the plant in fiscal 1Q17. The estimate for the startup cost at St. Pauls is ~$1.5 million in the second quarter, $2.2 million in the third quarter, and $2.8 million in the fourth quarter of fiscal 2016.

Competitors

Sanderson Farms’ peer Hain Celestial Group (HAIN) reported YTD (year-to-date) returns of -9.5%. Sanderson Farms, McCormick & Company (MKC), and Hormel Foods (HRL) reported positive returns of 14.4%, 9.9%, and 11.0%, respectively.

The First Trust Consumer Staples AlphaDEX ETF (FXG) invests 4.8% in HRL and 1.6% in MKC. FXG reported positive YTD returns of 1.0%. The PowerShares S&P 500 High Quality ETF (SPHQ) invests 1.2% in MKC.

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