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Sanderson Farms (NASDAQ:SAFM) has grown from a small general feed and seed business in 1947 to one of the nation's leading food corporations in fiscal 2012, with sales of more than $2.4 billion. They are currently the third largest poultry producer in the U.S., and will process (according to them) over 2.386 billion pounds of meat in fiscal 2013.
 They also say that they process more than 9.375 million chickens per week. They operate ten poultry plants, with the most recent one opening in Kinston, NC in January 2011. They also have company-owned feed mills and hatcheries. SAFM currently has 11,000+ direct employees and over 800 independent growers. They have a wide distribution of products under the Sanderson Farms® brand name.

Sanderson Farms was incorporated in Mississippi in 1955 as a poultry processing company that has as its goals to produce, process, market and distribute fresh and frozen chicken products. The stock became publicly traded in May 1987. On their company website, they say that "The company continues to build upon its rich traditions, believing that our success is largely due to the values instilled by the tenacious efforts of our founders and our extended family of employees. This includes the tradition of providing quality products to our customers and being responsive to their diverse needs, a hallmark of our business for the past 65 years."

All very well, but the real result that will impress investors is that their stock has gone from around 50 to 65 in the last three months. Also they continue to deliver on their dividend. A cash dividend payment of $0.17 per share is scheduled to be paid on May 21, 2013. Interestingly this marks the 11th quarter that SAFM has paid the same dividend. At the current price of $60.69, the dividend yield is 1.12%.

This price represents a -1.09% decrease from the 52 week high of $61.36 and a 68.07% increase over the 52 week low of $36.11.

SAFM is a part of the Consumer Non-Durables sector, which includes companies such as BRF-Brasil Foods S.A. (BRFS)) and Leucadia National Corporation (NYSE:LUK). SAFM's current earnings per share, an indicator of a company's profitability, is $2.39. Zacks Investment Research reports SAFM's forecasted earnings growth in 2013 as 69.36%, compared to an industry average of 19.6%. SAFM impressive run up probably has a lot to do with that growth. A huge number sure to inspire confidence.

The following ETF(s) have SAFM as a top-10 holding: PowerShares Exchange-Traded Fund Trust II PowerShares S&P SmallCap Consumer Staples (NASDAQ:PSCC) and PowerShares Dynamic Food & Beverage (NYSEARCA:PBJ).

It should be noted that the top-performing ETF of this group is PSCC with an increase of 12.47% over the last 100 days. It also has the highest percent weighting of SAFM at 4.58%.

Sanderson is getting cooperation and tax breaks from the governmental bodies local to their processing plants. For a new facility that they are constructing in Waco, Texas the Anderson County Commissioners' Court joined the Palestine City Council this week in making way for their arrival by approving a tax abatement agreement with the company and an inter-local agreement with the city.

Going forward, expansion efforts by the company seem to be on track and unopposed by the area residents, if we can infer a trend from this example. It seems that areas welcome the expansion of poultry processing in them, when the location is right. The jobs/tax benefit tradeoff goes in Sanderson's favor, and that will be good long term for the company's bottom line.

A fairly bullish article recently published on Forbes.com took a look at the company, and noted that "2011 was a fairly tough year as earnings expectations tumbled for SAFM. Fiscal year 2012 and fiscal year 2013 estimates also dipped in mid-2012 with the sharp rise in commodity prices (feed) and a global economy mostly in recession, forcing chicken prices lower. Sanderson dealt with low demand in 2012 by economizing its business and improving margins."

"At its last report, Sanderson actually reported a loss of 31 cents per share for the quarter, on revenue of $605.43 million for the quarter, compared to the consensus estimate of $559.30 million. The company's revenue for the quarter was up 15.1% on a year-over-year basis. Even though it missed the Zacks consensus estimates for a 7 cent loss, the strong revenues and positive guidance carried the stock higher."

This points out that while past history has shown the challenges facing anyone in the poultry business, Sanderson has overcome them this year. This performance is impressing analysts. "BMO Capital Markets raised their price target on shares of Sanderson Farms from $42.00 to $51.00 in a research note to investors on April 11. They now have a market perform rating on the stock." - Forbes.com

Some recent downgrades have been issued due to the massive run up in the stock and the 26 Price-to-earnings multiple. I think Sanderson can continue to grow and that current valuations may be high in today's market. However the growth of worldwide meat consumption should continue to act in its favor. I like the consistent dividend and see two possible plays for the stock. Buy it outright and sell forward month covered calls each month to lower cost basis and increase return. Or sell puts with a $60 strike. These should expire worthless and will generate cash waiting for a pullback. Getting put in at $60 following some premiums collection would be a reasonable entry for a fundamentally solid company.

Source: More Than Chicken Scratch Trading Sanderson Farms