Perhaps no consumer product has captured the affordability problems in America better than eggs.
The breakfast staple’s sky-high prices may have even shifted the presidential election in 2024. By the time voters went to the polls, egg prices were up 46% since the beginning of the year.
Rising prices caused Cal-Maine Foods‘ (Nasdaq: CALM) cash flow to blow the roof off of the hen house. That enabled the company to pay shareholders $8.72 in dividends in 2025, which comes out to a 10.2% yield.
But can the company continue to pay such an eggcellent yield?
Cal-Maine Foods is the largest producer of eggs in the United States, with a 14% market share.
In fiscal 2025, which ended in May, the company’s free cash flow exploded like a hard-boiled egg left on the stove all day, growing 250% from $304 million the prior year to $1.06 billion.
This fiscal year, however, free cash flow is eggspected to be sliced in half to $512 million. That’s not only lower than last year’s total, but it’s significantly lower than 2023’s number.
In the last fiscal year, Cal-Maine paid shareholders $330 million in dividends for a low 31% payout ratio. But this year could be a problem. Wall Street forecasts $789 million in dividends, which is 1 1/2 times the expected amount of cash flow.
So the company’s free cash flow is shrinking, and this year it won’t support the projected dividend payment.
But the biggest threat to the company’s payout is its dividend policy.
Cal-Maine has a variable policy. It pays one-third of its quarterly profits to shareholders in dividends.
On an earnings per share basis, profits are forecast to drop 60% this year.
Any company with a variable dividend policy is going to see fluctuations in its dividend. Cal-Maine’s payout has already been cut in each of the past two quarters, falling from $3.50 in May to $1.38 in November.
Now that the price of eggs has come down, bringing Cal-Maine’s earnings and cash flow with it, the company’s dividend is sure to follow.
Dividend Safety Rating: F
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