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.
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.
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!
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!