This is a company whose stock price has been limited by a wide spread but not well thought out intuition that the stock price should be $5, which it was once.
The facts are quite different. But the perception kept the price of the stock so low (from a P/E point of view) that the management, which owns the biggest chunk of stock, was forced to declare huge dividends to drive the price of the stock up.
Dividends are punished by our tax code. They do not count as an expense to the company. They count as income. Then when the shareholders get the dividend they count as income again.
Thus dividends are taxed twice. It is insane. In addition management of CALM owns only 30+% of the company. If they did not issue dividend but kept the money in the company and used it to grow, the beneficial impact to all of us AND them would be much better. But the marketplace did not believe in that thesis and the low share price resulted vulnerability for a hostile takeover.
If you own a company and you don't pay yourself then the company pays taxes on that amount. If you do take money then the company gets an expense and you pay taxes. I know this because I have owned companies for FORTY years. How the American public tolerates this is beyond me.
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As for what happens to this stock price in the future: It goes up. Management knows what they are doing. Although any of us can have one or two chickens in our back yards (even those without back yards), on a larger scale there are ever increasing barriers to entry all centered on issues of environment and cruelty to animals. None of these issues is going to away.
Further, eggs are cheap sources of good protein, terribly easy to cook and use, and terribly flexible as ingredients in a huge number of other prepared foods.
All of this results in relatively inelastic dynamics (demand is not terribly price sensitive within historic outer limits). This means, bottom line, that people do not buy more when the prices go down and they do not buy fewer when the prices go up.
If the demand were more sensitive to price then the stupid US government would not be poking their noses into this issue. They would not have to. The market would take care of business.
So I am bullish on CALM. Not to hold but to ride up, get out, wait for the sell off, wait for more bad news, then get back in.
I have made more money on eggs than I have on natural gas, technology and war!
At least they’re only taxed at 15% and not at ordinary rates … for now.
Agree, would much rather CALM pay down some debt and save some interest than give a dividend that most investors will stick in the bank at a fraction of a % return. Also, some investors pay attention to price to book when searching for value, dividends don’t help that ratio.
What you mean is that at least the second taxing is only at 15%! The first taxing is at the marginal tax rate of the company. But you are right, they are not taxed the second time at earned income rates.