Lanny’s Recent Purchase – ADM

Whoa Whoa!  The market has been on the slide, going downwards and man, new opportunities are unleashing!  I know everyone has been busy with re-couping over the KMI decision – they will be fine, and with the large moat they have, should survive.  It’s been a wild as all hell week and the capital has been unloaded.  Let’s check out the purchase.

Archer Daniels Midland Co. (ADM)

ADMlogo2

Here I go… I did it again.  I left another limit order until it expires on Archer Daniels Midland Company.  Here is the brief background on the entity from google Finance:

“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. The Corn Processing segment is engaged in corn wet milling and dry milling activities. The Agricultural Services segment utilizes its United States grain elevator , global transportation network and port operations to buy, store, clean and transport agricultural commodities, such as oilseeds, corn, wheat, milo, oats, rice and barley, and resells these commodities primarily as food and feed ingredients and as raw materials for the agricultural processing industry. Wild Flavors’ products include flavors, colors, sweeteners and health ingredients, as well as ready-to-market concepts and complete solutions.”

We all know that Mr. Market continues to take a downward turn and in these scenarios – we have to try to be ready for opportunities that unlock themselves.  This is one that I couldn’t pass up.  Heck, I couldn’t even pass up the opportunity to purchase a dividend aristocrat for $13 or almost 27.5% lower than Bert’s purchase price into this company when he made his purchases – Bert – thank you for introducing this company to me and showing me the aristocrat that has been showing it’s true colors and true opportunistic value.  Without your analysis and actions, I more than likely wouldn’t have come across or even considered this aristocrat.  This downturn has allowed us investors to buy more dividend income for less price, one of the many benefits we can experience through this.

ADM Stock analysis

Why did I then purchase this company from a dividend and stock metric standpoint?  Let’s run it through the Dividend Diplomat Stock Screener for old time’s sake:

  1. Price to Earnings (P/E) Ratio: Based on the forward EPS for 2016 at $3.08, the price of $34.50 computes out an 11.20 ratio – very undervalued, below the S&P and below the threshold we like to see.
  2. Dividend Yield: Additionally, at $1.12 annually per share per year, at a price of $34.50, this led to a yield of approximately 3.25% I like it, lower than my overall weighted average yield, but that’s okay, this is an aristocrat!
  3. Dividend Aristocrat Status – outside of my frequent purchases into EMR, I haven’t bought an aristocrat in a while it feels like. This definitely solidifies my desire to continue to build my positions here.  Should Bert consider this now as one of his 5 always buy stocks?  Over 25+ years of increasing dividends, gotta love it.  Bert and I have been chatting about our new horizons and outlook and it appears aristocrats are going to be even more prevalent, so be on that lookout!
  4. 5 Year Dividend Average Yield: Additionally, I love it when the current yield trumps the heck out of the 5 year yield average. This is essentially higher by a full 100 bps or 1.00% than the 5 year average.  This shows further undervaluation from my dividend investing mind.
  5. Dividend Growth rate: The impact of the dividend growth rate is huge, and they definitely aren’t shy here. The last year growth was 16.67% (HUGE!!) and the 3 year growth on average was right in line at 17.18% (love the consistency), definitely higher than my current weighted average DGR.  This will allow my dividends to grow at a very solid rate for years to come it looks like.

Is that enough for us to make that decision here?  It was definitely enough for me.  Further, year to date the stock has been diving down to the tune of 34% since 12/31/14.  It’s always hard to catch these types of long-term dividend stocks at such valuations.  I just couldn’t pass up this deal here.  Very lucky and fortunate I was able to capitalize on something here.  (Insert sad comment regarding KMI’s 74% dividend cut…OUCH!)

ADM Stock Purchase Summary:

Without further ado, here is the summary of my stock purchase.  I bought 50 shares of Archer Daniels Midland Co. (ADM) at $34.50 triggered by a FREE limit order trade (hell yes!).  Total Price: 50 X $34.50 = $1,725.00.  Total dividends added to my annual income based on purchase of ADM = 50 X $1.12 = $56.00 added per year or $14.00 per quarter going forward.  I am very excited about adding this dividend aristocrat to my stock portfolio!  Looking forward to seeing my dividends reinvest (which is what us Diplomats DO!!!).

What are your thoughts on the purchase?  Making any moves in the downturn during the week of 12/7?  What are you seeing?  Would you be buying ADM at these levels?  Please share and thank you all so much again for coming by, definitely appreciate it.

-Lanny

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12 thoughts on “Lanny’s Recent Purchase – ADM

  1. I think you got in at a good valuation. This is one if those sit and wait companies. I bought some recently for my 401k portfolio. Prior to that, I made a mini purchase in my regular taxable account at a higher cost basis.
    Not bad a purchase for a company in th consumer sector. (The products are farm based which explains some of the price swings based on the commodities).
    Enjoy your dividends! These should be good for many years.
    D4s

    • Div4Son,

      Thank you very much! It is a sit and wait company – an area of my portfolio I didn’t individually have targeted, so it filled a voided and an aristocrat to boot.

      I look forward to receiving my first few dividends from them. What I’m most excited about is the growth and hopefully, also (fingers crossed) purchasing them again if they drop a few percentage points further (absolutely would love them in the $32’s as well. Are you looking to buy any more?

      -Lanny

  2. Lanny,

    Nice move. I just picked up another 25 shares on Friday, too. Not my favorite business in the world due to the fact that it’s largely a price taker in the commodity space, and the low margins don’t help. However, you have to love that yield and very lengthy dividend growth streak. Great dividend metrics all around. In addition, the core products should remain in demand for a long, long time to come, and it’s on those big dips that you have to add to more cyclical plays like this. 🙂

    Keep it up!

    Cheers.

    • Jason,

      Loving it and saw your tweet. Commodity does provide volatility. The yield, the growth streak, the growth rates and an area where a lot of hands need some ADM, eh?

      I hope we can buy some more – looking forward to a 3-5% swing down if that happens (sad thing that I want the price to drop more, right? Obviously as long as the fundamentals of the business are strong and in tact). Congrats to you and cheers my man!

      -Lanny

  3. No need to convince me about this buy. At these prices, value and yield ADM is looking mighty compelling. I have added some in November and in December. Things are getting really hammered these days. EMR all of a sudden looks to be back in play as well. The market sure loves to give us new buying ops seemingly out of nowhere. ADM is still on my Dec. buy list.

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