Stock Purchase: Archer Daniels Midland (ADM)

Last week I was very active adding stock to my Dividend Retirement portfolio, where I made 4 total purchases.  In my last post I discussed the first of these purchases which was a 75 share stake in KMI.  This left ADM, SO, CMI, DIS and UPS on my current buy list.

For my next buy I set my sights on Archer Daniels Midland (ADM) and purchased 38 shares of the company on August 4, 2015.

Company Overview:

Archer-Daniels-Midland Company is a processor of oilseeds, corn, wheat, cocoa, and other agricultural commodities and manufactures protein meal, vegetable oil, corn sweeteners, flour, biodiesel, ethanol, and other value-added food and feed ingredients. The Company’s segments include Oilseeds Processing, Corn Processing, Agricultural Services and Wild Flavors and Specialty Ingredients. Source – Google Finance.

ADM scored a very respectable 7.25 out of 10 in my recent dividend growth stock ranking screen which means that many of the dividend and financial parameters I look for in a company are strong for ADM.

ADM Dividend Growth Stock Ranking Results

All values from time of analysis earlier this month.

 

For a detailed explanation of this ranking system check out this post.

The ADM dividend yield is a healthy 2.4% but it is the 5-year dividend growth rate of 11.4% that makes it really attractive.  The most recent dividend increase was a greater percentage than the 5-year average so perhaps we are in store for some accelerated increases.  The payout ratio is only 29.5% so there appears to be plenty of room to grow the divvy and ADM has increased their dividend every year for 40 years straight!

ADM Dividend Growth

*Projected 2015 dividends

 

Earnings growth has not been great over the past 5 years but analysts expect this to pick up over the next 5 years with an annual growth rate of 7.4%.  ADM also has very little debt with a debt/equity ratio of 0.34.

The PE ratio for ADM is quite low at 12.5.  The analyst consensus price target for ADM is $53, representing an 11.8% margin of safety at current levels.

Finally, I expect the many acquisitions ADM has made, especially WILD, to produce a large boost in profits.  The company is also targeting about $2 billion worth of share repurchases.  At current price levels it looks to me like ADM is a bargain.

 

Archer Daniels Midland (ADM) Purchase Details

  • Sector: Consumer Staples
  • Industry: Agricultural Products
  • Purchase date: 8/4/2015
  • Portfolio: Dividend Retirement Portfolio
  • Shares purchased: 38
  • Cost per share: $48.33
  • Commissions: $14.95
  • Cost basis: $1851.49
  • Yield on cost: 2.3%
  • Forward income: $42.56

These 38 shares of ADM add $42.56 of forward income to my portfolio, bringing the total up to $2223.48.

My Dividend Retirement portfolio has been updated to reflect my new addition.

What are you thoughts on ADM?  Please let me know in the comments section below!

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4 Responses

  1. DE,
    Great purchase. ADM is definitely on my buy list in the near future. Thanks for sharing.
    take care,
    LOMD

    • Dividend Empire Dividend Empire says:

      Thanks LOMD! ADM has been on my buy list since the beginning. Glad to finally be an owner at a good price.

      Ken

  2. DivHut says:

    ADM is a great company with a very impressive long term streak of dividend distributions. I wish I would have added that name to my portfolio a long time ago. I nibbled on it a while back as I wanted to initiate a position. I have other names I’d like to buy before ADM in August but it’s a company I’d like to increase my position in some day. Thanks for sharing.

    • Dividend Empire Dividend Empire says:

      Hi DivHut – thanks for stopping by. I see this position growing quite a bit into one of my core holdings. I’ve always been a big fan of ADM and I like these levels.

      Take care,

      Ken

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