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Archer Daniels Midland: Dividend Growth and a 4% Yield

Archer Daniels Midland: Dividend Growth and a 4% Yield
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By Thursday, 28 May 2020 11:57 AM Current | Bio | Archive

The global population is expected to reach nearly 10 billion by 2050. One of the biggest challenges the world faces is the rising global population, and by extension rising demand for food. After all, there is a finite amount of available farmland for growing food. Therefore, the agriculture industry is likely to see sustained and growing demand for many years.

The best agriculture stocks position investors to profit from a long-term growth trend, as well as high dividend yields and dividend growth. Archer Daniels Midland (ADM) is a Dividend Aristocrat, having raised its dividend each year for over 40 consecutive years. The stock also has an attractive 4% dividend yield. For all these reasons, Archer Daniels Midland is our top agriculture stock and a buy for long-term investors.

Business Overview and Recent Events

Archer Daniels Midland was founded in 1902. Today, it is the largest publicly traded farmland product company in the U.S., with over $64 billion in annual revenue, and a stock market capitalization above $20 billion. ADM’s businesses include processing of cereal grains and oilseeds, as well as agricultural storage and transportation.

The company has performed relatively well to start 2020. In the most recent quarter, revenue declined 2% to $15 billion. Adjusted earnings-per-share of $0.64 increased 39% year over year, solidly beating analyst estimates by $0.08 per share. The company’s largest operating segment, Ag Services and Oilseeds, grew adjusted operating profit by 1%.

The current business environment is uncertain for Archer Daniels Midland, as the coronavirus crisis threatens to send the U.S. economy into a recession. But the company has prepared for this by shoring up its balance sheet. ADM ended the most recent quarter with $4.7 billion in cash and cash equivalents on its balance sheet.

Why ADM Is Positioned for Long-Term Growth

ADM is well-positioned to capitalize on the challenge of feeding the world’s growing population. It dominates the industry, which is a significant competitive advantage. ADM’s core Ag Services & Oilseeds segment manages approximately 10% of global agriculture commodity volumes. The company has approximately 60 different oilseed products, and possesses over 120 processing assets in 16 countries around the world.

This operational strength allows the company to invest more aggressively in new opportunities for growth. Another growth catalyst for ADM is alternative proteins, which have enjoyed increasing consumer demand in recent years. This drove 75% growth in adjusted operating profit for ADM’s Nutrition segment last quarter.

Continued growth in the years ahead will allow ADM to pay rising dividends to shareholders. ADM has paid 353 consecutive quarterly dividends to shareholders, an 88-year streak of uninterrupted dividend payouts.

Final Thoughts

ADM is an industry leader and is likely to continue generating growth from the world’s rising population. In the meantime, ADM is a shareholder-friendly company that returns a great deal of cash to shareholders through dividends. ADM stock has an attractive 4% yield, and the company has increased its dividend each year for over 40 years. It is likely to continue raising its dividend, even during a recession. As a result, we view ADM as our top agriculture stock.

Ben Reynolds is CEO of Sure Dividend. Sure Dividend helps individual investors build high quality dividend growth stock portfolios for the long run.

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The global population is expected to reach nearly 10 billion by 2050. One of the biggest challenges the world faces is the rising global population, and by extension rising demand for food. After all, there is a finite amount of available farmland for growing food....
archer daniels midland, ADM, food, dividends, agriculture
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2020-57-28
Thursday, 28 May 2020 11:57 AM
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