Market Overview

Can Sanderson Farms Maintain Its Dividend Yield?


Welcome to your daily dividend safety check. Today, we'll be looking into Sanderson Farms (NASDAQ:SAFM) to see if its 1.55% dividend yield is safe as the company is releasing its earnings on December 17, 2020 before the bell. To better understand this, we'll be looking into its earnings to dividend payout ratio and history of dividend cuts.

Sanderson Farms's Payout Ratio

Payout ratio is an important measure of dividend affordability. It's equal to dividends per share divided by earnings per share. Investors should not be too concerned about Sanderson Farms's relatively low payout ratio of 29.73%. When a payout ratio is low like this (i.e. below than 75%), it indicates a company has the money needed to cover its dividend. A ratio closer to 100% could suggest that a company is struggling to pay its dividend.

Has Sanderson Farms Cut Its Dividend in the Recent Past?

Generally, past behavior is not highly predictive of what's to come. However, companies that have a recent history of dividend cuts are more likely to cut them again due to less incentive to appease income investors than companies with historically consistent or rising dividends. In the last few years, Sanderson Farms has not cut its dividend. Although there is no guarantee of dividend safety, this does imply the company's management is reluctant to cut it.

How Safe Is Sanderson Farms's Dividend Overall?

Sanderson Farms has failed neither of our dividend safety tests. It has a low payout ratio and no recent case of dividend cut. With all of this in mind, it is quite unlikely that Sanderson Farms will cut its dividend next quarter.

Looking for more help identifying reliable investments? Check out Benzinga's Breakout Opportunity Letter.


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Posted-In: Dividends

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