Well, well, well. Hold on tight. The stock market may as well be considered big red, because that’s the only color we have been seeing as of late. And, I made another purchase. A very familiar one as you can see by the title. It’s been a very confusing blood bath out there, as I like to call it. This has made my stomach drop everyday. Everyday, only because I wish I had $30K in cash ready to just fire away at the market. It’s incredible the, as Jim Cramer from CNBC calls it, “accidental high yielders” that are out there. I believe Archer Daniels (ADM) to be one of them. Fire Away!
Archer Daniels Midland Co. (ADM) x2
I purchased ADM again for the second time, about a month or so since my first purchase of them back in December of 50 shares. On the same note – Bert made a smooth purchase as well last week over this dividend aristocrat. Nice job Bert! I wanted to stick to my goals and this purchase was just at the $3,000 mark, as it is one of my goals to make larger purchases to reduce my trading fees. Additionally, I also explained my 5 reasons why I am making larger purchases this year – I think so far, it’s off to a fun start.
However, I need to make a note. I bought this stock with a limit order at $33.26 that was placed last week and this triggered on the 14th of January. Well… the Friday of the 15th came in pouring a bad storm and the stock plummeted to close at $31.51 or a whopping $1.75 cheaper! I bought a gallop of 90 shares at this price and man, that one is funny – That is $157.50 that I could have used to buy 5 more fricken shares almost of this company. DAMMIT! Timing was one day off. What can you do about that? Can never predict, as we all know.
Now… why did I purchase? Outside of it being one of the lowest debt to equity dividend aristocrats, this one definitely hit some wonderful metrics on the dividend diplomat stock screener. Here is the skinny, since I purchased this stock barely 30 days ago and Bert has already sang his song from last week. Here we go:
1.) Price to Earnings (P/E) Ratio: I purchased the stock at $33.26 this time around, which based on future earnings, gave me a P/E of 10.80. No brainer and showed undervaluation.
2.) Dividend Yield: at the price point of $33.26 with a dividend of $1.12 – a yield at 3.37% is not common for ADM. In fact, their 5 year dividend yield average is 2.40%. Therefore, we are talking a full percent higher. Loving it. (see Why I compare the yield to the 5 year average)
3.) The payout ratio: Based on those future earnings, the payout ratio calculated out to be 36%. Extremely low with AMPLE room for dividend growth. Keep increasing that cash flow back to me please!
4.) Dividend Growth Rate: After increasing their dividend 41 straight + years, the 5 year dividend growth rate stands at 13.52% and the 3 year at 17.18%. It is “OKAY” if this slows down, given the current economic environment and the difficulty in maintaining a high dividend growth rate in an earnings pressured environment. They can cut their growth rate in half for all I care at this point. But.. I do love my dividend growth rate.
This purchase, all in all, fits the mold of where my goals for 2016 was leaning towards. I do not believe this company will keep e up at night, with $20B in market capitalization, they are one of the biggest players in the production of feed/ingredients for food. We always have to eat right? I don’t think we are getting skinnier, especially in America. Bert and I were both fairly keen on this stock and want a larger position – and this was also on Bert’s December stock watch list in 2015. This further aligns with my focus after KMI’s dividend cut announcement… and I am happy with this purchase, fairly happy.
ADM Stock Purchase (x2) Summary:
Without further ado, here is the summary of my stock purchase. I bought 90 shares of Archer Daniels Midland Co. (ADM) at $33.26 (3.6% less than last price) triggered by a limit order trade (Expense = 0.23% for trade). Total Price: 90 X $33.26 + 6.95 = $3,000.35. Total dividends added to my annual income based on purchase of ADM = 90 X $1.12 = $100.80 added per year or $25.20 per quarter going forward. I am very excited about adding this dividend aristocrat to my stock portfolio! This aligns with my goal, is a huge purchase and I jumped my position from 50, to a total of 140 now, and this occurred well before their dividend increase and ex-dividend date (which I predict ex-date to be February 12th). Therefore, my first dividend will be $39.20… Pumped. Looking forward to seeing my dividends reinvest at a total now (since I own 140 shares) to pick up more than 1 share per quarter.
What are your thoughts on the purchase? Making any moves in the downturn during the week of 1/11? What are you seeing? scooping up any big dividend aristocrats, such as Target (TGT), Johnson & Johnson (JNJ), Procter & Gamble (PG) or AT&T (T)? Would you be buying ADM at these levels? Please share and thank you all so much again for coming by, definitely appreciate it.