Recent Buy – ADM

Well, I couldn’t stay on the sidelines too long in 2016.   I am AMPED and ready to start the year off strong after setting my goals and realizing that I have some serious work to do.   One of the stocks I already own has been trading at a discount of late and let me tell you, I just couldn’t hold off any longer.  Let’s dive right in and see which company won the honor of being my first stock purchased in 2016 (If the title hasn’t given it away already). Buying Stocks

Early last week, I had some extra capital lying around and decided to picked up an additional 12 shares of Archer Daniels Midland (ADM) for $35.54/share, which looks especially expensive now considering the stock is trading in the $33s.   This move added another $13.44 of projected annual dividend income  to my total.  While this amount is not monumental by any stretch, it is always nice to see your income take a step forward after taking a step back, which seemed to be the theme of 2015 for me as I endured dividend cuts from both ARCP and KMI.  I know you are thinking one thing….this small purchase is the complete opposite of Lanny’s recent strategy of only buying stocks in bulk aka at least $3,000!  I love his thought process and the idea of lowering his cost of capital.  I was fortunate to have a free trade credit, so my cost to initiate this trade was a cool $0!   After this buy, I now own 39.4245 shares of the company and receive $44.15 in income from them annually.   If you have visited this website recently, it shouldn’t shock you that I decided to add to my stake since I have been loving this stock despite its recent slide.   So here are some of the reasons why I decided to buy now.

  • The company was on my last watch list and the metrics continue to become more favorable as the price falls.  I get it, the cheap oil is taking its toll on ADM and many other companies out there.  But each subsequent decrease in price makes the metrics of our dividend stock screener look that much better.  ADM’s P/E ratio is now below 11X, their dividend yield is 3.35%, and best of all, they have an insanely low payout ratio.   The low payout ratio is the key to me and provides me with some comfort over the dividend safety as earnings growth slows.   Unlike some of the other major oil companies I own, I am not staring a 80%-100% payout ratio in the eyes.  So knowing that they aren’t even paying half of their earnings to shareholders gives me some confidence in the safety of their dividend and heck, their ability to increase their dividend and keep their streak as a Dividend Aristocrat alive! 
  • After dissecting the big KMI dividend cut at the end of 2015 and seeing the impact that high debt levels have on a company, I started to shift my focus to companies that are on the opposite end of the spectrum and have low debt levels.    After KMI’s announcement, I ran a stock screener to identify the Top 5 Dividend Aristocrats with low debt to equity ratios and find some great dividend paying stocks with very management debt payments.  Well, I think you see where I am going with this, ADM was one of the five companies that popped out of this screener.  This only strengthened my desire to add to my stake at the next opportunity.
  • Lastly, the company is a Dividend Aristocrat.  I know that sounds crazy, but seeing my dividend income slashed twice last year has placed dividend safety as one of my top priorities.  While dividends are never guaranteed, focusing on Aristocrats puts you in the best situation to continue to receive a steady, growing dividend for a long period of time.  ADM has increased their dividend for over 40 years and is set to announce another increase in February.  The dividend growth rate won’t be as large as earlier years I’m sure.  I’ll tell you this, I’ll be watching this announcement closely come February.  I’m tired of messing around here.
  • This investment helped progress towards knocking out one of my 2016 goals of investing $15,000 in “New Capital” during the year.    I transferred over the $432 from my checking account…I have now achieved 2.88% of my goal.  Talk about progress!  You have to start somewhere, right?

Well, this purchase wasn’t a big splash by any stretch but it was a solid way to start the year!   Trust me, the bigger splash is coming soon since I should gain access to the capital tied up in the three mutual funds I decided to sell recently.   I just think ADM is a solid company right now and this is a great time to pick up some additional shares and lower my cost basis.  The dividend metrics are strong and the company ACED our dividend stock screener.   I can’t think of any reasons why I shouldn’t have added shares.  Who know….this may not be the last time I purchase ADM if the stock price continues to slide.

What are your thoughts on my purchase?  Is ADM on your watch list?  If not, where else should I have directed my capital?  With the turbulent market, are you staying on the sidelines or are adding positions in your portfolio?   Do you prefer small purchases or Lanny’s strategy of investing large chunks of capital at a time and reducing trade fees?

-Bert

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17 thoughts on “Recent Buy – ADM

    • Absolutely! Great minds think alike haha It seems that ADM is the hot stock of recently and many others (including Lanny) are jumping all over it. Great company right now and the price keeps getting more attractive. It’ll be hard to continue holding off here.

      Thanks for stopping by.

      Bert

  1. A solid buy for sure (oh right, nothing is for sure in equity 😉 ). But without joking, this should be a very good addition for your portfolio.
    Congrats on the new effortless income.

    • hahaha Thanks Team CF. I’m all for building as much income as I can without lifting a finger. It seems like there should be a catch, right? Are you thinking of adding any to your portfolio?

      Take care.

      Bert

  2. Bert,
    That is a fine move. I am looking at ADM as one of my favorite stocks right now along with AMP, MMM, and a few others. I like the industry – people always need to eat – and the company fundamentals. Congrats with the increased position.
    – Gremlin

    • Gremlin,

      I love every stock on you list. I purchased MMM last year and I am considering adding more to my position. It may not be as discounted as ADM right now, but it is an impressive company. Your assessment is spot on. ADM has made itself THE PLAYER in an industry that is an integral part of everyone’s daily lives. I love those kind of stocks.

      Bert

    • Thanks R2R!

      You must have the patience of a saint if you were waiting for ADM to fall back into this buy zone. I bought it last year in the low 40s when I thought it was trading at a discount to the market. Just out of curiosity, what metrics led you to believe that ADM was over-valued before now?

      Take care and thanks for stopping by?

  3. I’m liking ADM at these levels too and have been adding to them for a couple months. So far in 2016 I started off with EMR and BNS but ADM and others are on my radar too. Not a bad start to 2016 with some nice bargains to be found. Thanks for sharing.

    • DivHut.

      Everyone has such great things to say about ADM right now along with BNS. You are off to one solid start in 2016 and have added some great/impressive companies to your portfolio. What other stocks are on your radar? Any gems you would like to share with the community 🙂

      Thanks for stopping by!

      Bert

      • Same gems as I write about each month in my “stock considerations” posts. Still like TD, BNS, RY, EMR, CAT, ADM and DOV in the near term. Of course, if things get uglier and the consumer staples start to get rocked more, VFC, CL, GIS, PEP, GWW and BDX in health will look appealing to me too.

  4. i was writing a Short Put on ADM too. Expiration Date is the 19 February.
    I got 85 Dollars Premium, and if the share price remains below 33,50 I have to buy 100 shares of ADM. =)
    This will add another 112 Dollar to my annual dividend income.
    I think we can not do much wrong with ADM 😉

    Best regards from Austria!

    • If you could scoop up 100 shares of ADM below that price you would make out very well. This just seems like too good of an opportunity to continue building and adding to my position in this great company. The lack of debt and payout ratio are extremely attractive to me as the company continues to tread water in the current economy.

      Keep us updated if you end up making the purchase here. I like the Short Put strategy.

  5. Looks like a great company to buy at around 11 times earnings. Another stock trading at 11 times earnings since the recent downturn is Emerson Electric, but I don’t own it so I haven’t followed it closely at all. Do you think this is a good time to initiate a position?

    • Brian,

      this is a great price for the company. I am also a huge fan of Emerson, but I initiated a very large position compared to the rest of my portfolio last year so I am going to use this downturn to build other positions in my portfolio. I don’t want to tell you yes or no, but it would definitely be at the top of my watch list if I didn’t have such a large position already. I guess it just depends which other stocks you are also considering.

      Take care and thanks for stopping by.

      Bert

  6. Nice buy, Bert. Who doesn’t love great shares at great prices?

    By the way, are you sure you and Lanny aren’t twins? Cos you sure are trading identically 🙂 I think that just goes to show that you both have a great eye for choosing a stock that’s looking great.

    One step closer to FI..

    Tristan

    • Tristan,

      you are absolutely right. I am one step closer to FI than I was before this purchase. What a great way to look at it, regardless of which stock I purchased. To answer your question, I can confirm with certainty that Lanny and I are not twins haha He has about a yera and a half on me. As Div4Son mentioned earlier, great minds think alike! For the reconrd, I was the first one to purchase ADM. However, it was at a much higher price…looks like I am the loser.

      Thanks for stopping by and the good laugh tonight.

      Bert

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