The global population is expected to reach nearly 10 billion by 2050, according to the U.N. One of the biggest challenges the world faces is rising demand for food. Therefore, the agriculture industry is likely to see sustained and growing demand for many years from the trend of a rising global population.
The best agriculture stocks position investors to profit from a long-term growth trend, along with solid dividend yields and dividend growth.
The following 3 agriculture stocks are appealing for dividend growth investors.
Agriculture Stock: Archer Daniels Midland (ADM)
Archer Daniels Midland is a Dividend Aristocrat, having raised its dividend each year for over 40 consecutive years. The stock also has a 1.8% dividend yield.
Archer-Daniels-Midland is the largest publicly traded farmland product company in the United States. Its businesses include processing cereal grains, oilseeds, and agricultural storage and transportation.
Archer-Daniels-Midland reported its second-quarter results for Fiscal Year (FY) 2022 on July 26, 2022. The company had another excellent quarter starting the year's first half. The company reported adjusted earnings per share of $2.15 the quarter vs. $1.33 in 2Q21, an increase of 61.6% Year over Year (YoY). Revenues were up by 19%, from $22,926 million in the second quarter of 2021 to $27,284 million.
Net income increased from $712 million to $1,236 million, or a 73.6% growth for the quarter compared to 2Q21. For the first six months of the year, revenues are up 21.8% compared to the first six months of 2021. Net income is also up for the first six months year-over-year, by 63.5%. Overall, earnings per share are up 62.5% for the year's first six months.
The dividend payout ratio is not high, at only 26% based on 2022 earnings. Also, because the company's profits performed well during the last recession, which saw earnings grow from $2.84 in 2008 to $3.06 in 2009, we believe that the dividend is relatively safe.
Archer-Daniels-Midland's business is recession resilient since the demand for food products is not cyclical. Archer-Daniels-Midland is one of the most significant players in its industry and has competitive advantages due to its scale and geographical reach.
Agriculture Stock: The Toro Company (TTC)
The Toro Company manufactures mowers and other products, and generates $3.4 billion in annual revenue. Toro operates in North America as well as internationally, with three quarters of total revenue coming from the United States.
Toro reported third quarter results on September 1st, 2022. Q3 net sales improved 18.8% year-over-year to $1.16 billion. Adjusted earnings per diluted share increased 29% from $0.92 in the prior year period to $1.19 in Q3 2022. Adjusted operating margin for the quarter was 14.1%, up from 13.1% in the same prior-year period.
Leadership updated their fiscal 2022 outlook which guides for net sales growth of about 14% and adjusted EPS in the range of $4.07 to $4.17 per diluted share, a solid 13.8% year-over-year increase.
Toro’s earnings-per-share has moved higher every year since 2009. It has managed to grow earnings at an average rate of 14.5% annually since 2012. Toro has managed to grow both organically and through acquisitions over the years, and we see that continuing with average annual earnings-per-share growth of 10% moving forward.
Toro will achieve this robust result with new acquisitions, like its recent purchase of Intimidator Group and Left Hand Robotics, and previously Charles Machine Works, as well as organic sales increases. We see mid- to high-single digit sales increases as remaining the norm along with a small tailwind from stock buybacks.
The stock has a current yield of 1.3%.
Agriculture Stock: Bunge Limited (BG)
Bunge Limited is one of the largest agribusiness and food companies globally, with integrated operations that stretch from farmer to consumer. The company buys, sells, stores, transports, and processes oilseeds and grains to make protein meals for animal feed and edible oil products for commercial customers. Bunge also produces sugar and ethanol from sugarcane, mills wheat and corn, and sells fertilizers.
On July 27th, 2022, the company announced Q2 2022 results, reporting quarterly earnings of $2.97 on an adjusted basis compared to $2.61 in the same period last year. Bunge reported revenues of $17.9 billion, up 16.5% YoY, from $15.3 billion in Q2 2021. The company's agribusiness remained a beneficiary of the right commodity supplies and strong demand.
Management also provided an outlook for full year 2022 with upward EPS adjustments from $11.50 to $12.00 for 2022. The company has benefited from the surge in global crop prices as a growing global population has increased the demand for more food-grade oils and well-fed livestock, even though the bottlenecks in the global supply chain persist.
Bunge Limited has grown its EPS by a CAGR of 12.8% over the past nine years. There are new opportunities for significant revenue expansion for the company. For example, the growth in renewable diesel, made in part with crop oils, which is a small but growing portion of Bunge's business, can be a significant revenue contributor in the future as the world moves towards sustainability. Additionally, we have assumed a 6.5% dividend growth forecast over the next five years.
Bob Ciura has worked at Sure Dividend since October 2016. He oversees all content for Sure Dividend and its partner sites. Bob received a Bachelor’s degree in Finance from DePaul University, and an MBA with a concentration in Investments from the University of Notre Dame.
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