demonstrate that the dividend for 2009 q4 reflects the stated current dividend polic 586386

Cal Maine Foods, Inc. (NASDAQ: CALM) is the leading egg producer in the United States. Cal Maine’s earnings tend to be highly volatile. Demand for eggs is seasonal, typically being higher in winter than in summer. On the supply side, costs are driven, to a great extent, by corn prices that are subject to business cycle influences and are thus very volatile. In consideration of earnings volatility, Cal Maine might have difficulty sustaining a steadily rising dividend level. Probably in view of such considerations, Cal Maine changed its dividend policy from a stable dividend policy to a constant dividend payout ratio policy (denoted a “variable dividend policy” by management) in its fiscal year 2008. The following is the explanation by the company:

“We have paid cash dividends on our Common Stock since 1998. The annual dividend rate of $0.05 per share of Common Stock, or $0.0125 per quarter, was paid in each of the fiscal quarters shown in the table above, through the second quarter of fiscal 2008. We have also paid cash dividends on our Class A Common Stock at a rate equal to 95 percent of the annual rate on our Common Stock.

Effective 30 November 2007, the Company’s Board of Directors approved the adoption of a variable dividend policy to replace the Company’s fixed dividend policy. Commencing with the third quarter of fiscal 2008 Cal Maine began to pay a dividend to shareholders of its Common Stock and Class A Common Stock on a quarterly basis for each quarter for which the Company reports net income computed in accordance with generally accepted accounting principles in an amount equal to one third (1/3) of such quarterly income. The amount of the dividend payable on each share of Class A Common Stock is in an amount equal to 95 percent of the amount paid on each share of Common Stock. Dividends are paid to shareholders of record as of the sixtieth day following the last day of such quarter, and are payable on the fifteenth day following the record date. Following a quarter for which the Company does not report net income, the Company shall not pay a dividend for a subsequent profitable quarter until the Company is profitable on a cumulative basis computed from the date of the last quarter for which a dividend was paid.

Management and Board of Directors of Cal Maine believe the variable dividend policy will more accurately reflect the results of our operations while recognizing and allowing for the cyclicality of the egg industry.”

Earnings per Share (EPS) and Dividends per Share (DPS) for Cal Maine Foods (Fiscal Years End 31 or 30 May)

1. From the table above, identify the fiscal quarter when Cal Maine first applied a constant dividend payout ratio policy.

2. Demonstrate that the dividend for 2009:Q4 reflects the stated current dividend policy.