Sanderson Farms (SAFM) Stock Analysis
Sanderson Farms Dividend
The Sanderson Farms dividend has been paid continuously since 1988. Although it doesn’t have a policy of increasing its dividend annually; it is included in the Dividend Growers / Producers List because of its long term consistency, conservative management,
and pristine balance sheet.
Current Dividend: $0.96
Dividend Yield: 0.8%
Cash Dividend Payout Ratio: 61%
Market Capitalization: 2.7 B
Enterprise Value: 2.4 B
Special Dividend: $1.00 (ex-dividend 10/05/16)
Special Dividend Paid: $0.50 (10/13/15)
Sector: Consumer Defensive
Industry: Packaged Foods
Sanderson Farms (SAFM) is the 3rd largest poultry producer in the United States. With over 11,000 employees the company has relied on organic growth and is the only poultry company to build new plants in the last 15 years.
The company has 11 processing plants, nine hatcheries, eight feed mills, one prepared food division, and 800+ independent contracted growers. With these resources they distribute poultry products to grocers, distributors, restaurants, and food service companies all across the United States and 40 other countries.
In order to meet the growing demand for their products in 2015 they completed a 140 million dollar complex in Palestine, Texas. The new modern facility includes a feed mill, hatchery, and poultry processing plant.
Sanderson Farms is a conservatively run family business. Joe Sanderson has been the CEO and/or Chairman of the Board of Directors since 1989. The company has paid off all its long term debt and maintains a high level of liquidity.
The poultry business is cyclical and competitive. This requires management to be cognizant, nimble, and prepared for supply cycles that greatly affect profitability.
The trend in the U.S. is toward more healthy and fresh food. SAFM is a leader in producing affordable natural lean protein.
The bird flu can cause harm to whole flocks. Great care must be taken in providing a healthy environment. All of Sanderson Farms products are homegrown and 100% natural.
Dividend Analyzer Checklist
(updated January 2017)
Dividend Safety Score (30/33 points)
Dividend Per Share (ttm): $0.88
Dividend Payout Ratio (ttm): 22%
Dividend Per Share (10 Year Growth): 7.7%
Cash From Operations (CFO) Per Share (ttm): $11.32
CFO Dividend Coverage (CFO / DPS): 12.9 (6/6 points)
Free Cash Flow (FCF) Per Share (ttm): $4.83
FCF Dividend Coverage (FCF / DPS): 5.5 (6/6 points)
Net Financial Debt: $-243 M
Total Assets: $1385 M
Net Financial Debt / Total Assets: -18% (12/12 points)
Net Financial Debt to EBITDA (ttm): 2%
Total Liabilities to Assets Ratio (Qtr.): 18%
Piotroski Score (1-9) (TTM): 6 (6/9 points)
Profitability & Growth Score (27/33 points)
Revenue (10 Year Growth) *CAGR > 4.14%: 10.3% (4/4 points)
EPS Basic Cont. Operations (10 Year Growth) CAGR > 4.14%: 10.4% (4/4 points)
Cash From Operations (10 Year Growth) CAGR > 4.14%: 11.9% (6/6 points)
Operating Earnings Yield (ttm): 14.1% (7/7 points)
Net Income (ttm): $140 M
Gross Profit (ttm): $377 M
Total Assets: $1385 M
Gross Profitability Ratio = GP / Total Assets: 27% (6/12 points)
Cash Return On Invested Capital (CROIC)(tttm): 10%
Return on Invested Capital (ROIC): 13%
Return on Invested Capital (ROIC) (5 Year Median): 15%
Return on Invested Capital (ROIC) (10 Year Median): 13%
Valuation Score (26/34 points)
Free Cash Flow Yield (ttm): 4.4% (5/9 points)
EV to EBIT (ttm): 6.4 (9/9 points)
EV to EBITDA (ttm): 5.0 (8/9 points)
PE10: 23.6 (4/7 points)
Price to Sales Ratio (ttm): 0.7
Price to Book Value (ttm): 1.6
Price to Earnings Ratio (P/E) (ttm): 13.0
TOTAL POINTS – (83/100) (50 is an average score)
*Compound Annual Growth Rate (CAGR)
**A Compound Annual Growth Rate of 4.14% = a 50% gain over 10 years.
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(updated January 2017)
Sanderson Farms is ranked #2 (out of 246) overall and #1 (out of 34) in the Consumer Defensive sector by the Dividend Analyzer.
This may be one of the best values in the stock market. The below average dividend is offset by a pristine balance sheet, an outstanding long term profitability and growth record, sound management, and a favorable valuation.
At the current price, it is apparent that investors do not appreciate the company’s successful long term strategies of being a low cost producer and increasing volume through organic growth.
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