Recent Purchase – ADM

The last couple of months has been pretty active for me.  Since the beginning of February, I have either initiated a new position or re-upped my position in 6 stocks, with the most recent transaction occurring a few weeks ago when I purchased both CVX and PM.  Well, I had some extra capital laying around and wanted to purchase a stock that has been on my radar for a while now.   If you have followed our website over the last month, you will probably know which stock I purchased, as it has appeared in several articles recently.

 ADMlogo2

Over the last two weeks, I purchased ADM twice due to the timing of when I could transfer funds into my account.  In total, I purchased 26.891 shares of the company, adding $30.12 to my projected annual dividend income.  What’s funny is that I purchased the stock for essentially the same price twice even though the second purchase occurred almost two weeks after the second one (The first and second purchase prices we $47.56 and $47.66, respectively)!  I would have written about the purchase after the first transaction, but I knew that I would be re-upping a position when funds were available so I wanted to wait until my investing was complete.  So why did I invest in ADM?

The stock performed very well in our dividend stock screener when I performed a stock analysis last month.  Quite frankly,  I cannot remember a stock that has passed all of our metrics as well as ADM did. In addition, when I published my stock analysis at the end of March, ADM was trading in the low $47/share range, which was about the same purchase price at my time of purchases.  Since I recently published my stock analysis over ADM and the price has remained relatively the same, I will keep this section of the article brief.  If you want more detail or would like to see additional metrics, feel free to read the stock analysis!

  1. P/E Ratio was in the 14 range at the time of my purchases, which is below the S&P 500, and the company has a payout ratio below 30%.
  2. In February, ADM announced a dividend increase of 16.7%.  Not only was the dividend growth rate phenomenal, but it well exceeds my portfolio’s weighted average dividend growth rate.  Lanny introduced the metric to me at the end of  last year and now I love monitoring my portfolio’s growth rate.   Since my current portfolio consists of a lot of high yielding/low dividend growth stocks, adding ADM will provide a nice boost to my dividend growth rate and will balance this dynamic of my portfolio.
  3. ADM is a Dividend Aristocrat, so the company has a track record of increasing its dividend.  After my ARCP investment, which I sold earlier in the year, I told myself that I would place more emphasis on the longevity of the dividend.  If I would have focused on investing in a REIT with a longer track record of paying and increasing their dividend, I would have more likely than not invested in O over ARCP and the rest would be history as both have had stock prices trend in opposite directions.   The fact that ADM has increased its dividend for 40 consecutive years is pretty telling and leaves me very confident that management is committed to growing its dividend for the long-term.
  4. ADM is a market leader in its industry and represents a sector that is not present in my portfolio.  While I own shares of Scotts Miracle Gro, which is also in the agriculture industry, ADM and SMG are in different sectors of the industry.  Thus, by owning ADM, I am further diversifying my portfolio with another market leader.

Summary

Honestly, this was a no-brainer for me.  ADM passed every metric in our stock screener with flying colors and even passed several additional metrics we used in our analysis, such as comparing the five year average dividend yield and the dividend growth rate.   After I ran the screener and researched ADM further, I just kept thinking to myself that the reason we all have our own personal  stock screeners is to identify stocks that meet our investing strategies.  When a stock passes the screener and your research indicates it is a great company, you have to strongly consider initiating a position.  For me, I couldn’t find a reason not to invest and now I am a proud owner of ADM!

Do you own ADM or are they on your watch list?  Would you have purchased the stock based on the results of our stock analysis?  If not, why?  Are there any other companies you are watching instead of ADM?

Bert

 

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16 thoughts on “Recent Purchase – ADM

  1. Congrats on adding this dividend champion to your portfolio, Bert. ADM has done very well for me over the last couple of years and its starting to look interesting again after a pullback. Last year, tehre was a bit of a runoff in the stock price…would love to add more.

    Cant go wrong with this investment. I wholeheartedly support it!

    R2R

    • R2R,

      Thank you very much! I’m glad I have your support with it and can say that we are fellow shareholders. It is a great company and the pullback just presented too good of an opportunity to pass up on. I kept thinking that if I would have kept on waiting and watched the price appreciate, I would be kicking myself for not investing.

      Hopefully I will be able to replicate your success with ADM! Are you thinking about adding more anytime soon? Or is your focus elsewhere?

      Bert

      • Bert,
        Good to have you as a fellow shareholder. Adding more shares to ADM is on a backburner for now….I am focused on some other stocks, but all things considered, ADM is not a bad place to put money right now.

        cheers
        R2R

  2. Great to see others adding this stock as well! I recently purchased ADM considering the low PEG and the fantastic dividend history as you mention. Best of luck with your purchase!

    Cheers,
    Dividend Odyssey

    • Thank you very much Odyssey. I am going out on a limb and going to say that you recently added ADM as well? Congrats on your purchase. I love the dividend history and the strong recent growth rates. It is exactly what I want to see out of a low yielding dividend stock.

      It is interesting that you referenced PEG. I usually don’t pay too much attention to that metric for whatever reason. Do you have an article about why you use PEG ratio in your analyses? I would love to see if it is a metric I need to start considering in my analyses.

      Thanks for stopping by!

      Bert

  3. Great purchase on ADM… twice! Reminds me of a recent purchase of CAT which was bought twice too and almost the same price, I think it Lanny’s purchase (correct me if I am wrong), since that last purchase CAT’s been doing great and recently reported earnings. I know you will going to have the same success on ADM esp long term! Thanks for sharing!

    • Thank you FFF. You have a great memory. Lanny decided to purchase CAT in the same month, although his reasoning was slightly different. But I just know this because I talk to him daily, basically this is the B-side of the purchase article! My purchases were driven predominately by the fact that I did not have enough cash on hand to make one giant purchase. So I had to split it up into two transactions based on when the cash would become available. Lanny bought CAT once at the beginning of the month and didn’t have an intention on purchasing again. But when CAT continued to fall, he couldn’t resist and I can’t blame him one bit!

      I am very excited about ADM and hopefully you are right about the long term success part! Luckily, they have a great track record and are market leaders, so I am not too concerned about it 🙂

      Bert

  4. You’re going to love these growth dividend stocks, especially when combined to a nice yield! I’m glad Lanny introduced you to it. It’s such an important metric to me! Congrats 😉

    Cheers,

    Mike

    • DivGuy,

      Thank you very much. Dividend growth is so much fun to track and to be honest, my mind was blown once I started to pay close attention to how large some of the growth rates are. There aren’t too many places that will give you double digit raises annually. Let’s focus on not only getting passive income, but a large stream that grows at a high percentage annually!

      Bert

  5. Great buy! ADM is in my portfolio and they’ve been good to me so far. Funny you bought them twice in a short period. I’ve done the same with other stocks when I’ve realized I wanted a bigger stake. Enjoy your new income!

    – HMB

    • Thank you HMB! My first purchase was not nearly enough haha In hindsight, there were other stocks that I wish I would have purchased more shares of so that I would have a larger stake while the price was depressed. But once they started to increase, I would instead look elsewhere. Luckily, I feel like I learned from these experiences and transferred money as fast as I could to purchase more shares. Still I would like to have more, who wouldn’t haha, but I am very happy with my current stake now.

      I’m glad that we are now fellow shareholders. Thanks for stopping by!

      Bert

  6. I’ve never had ADM on my watch list, but the dividend growth rate and comparably small P/E make it seem like a good fit.

    Any idea why the stock is trading at such a discount to the rest of the market?

    Whenever i see that happen, i always try and get an idea about what that is, in case the market knows something that i don’t

    • Brian,

      Thanks for stopping by. Great point and I didn’t elaborate too much on what is causing ADM to trade at a discount at the moment. But you are correct, understanding what is causing the problems is just as important so you can determine if the issues are short term in nature or if they cracks are major, potentially threatening the long-term safety of the dividend. When I was performing the research, a lot of the issues seemed to be driven by changes in commodities that were negatively impacting the margins. This occurred during at the beginning of 2015 and the stock hasn’t really moved since them. I am not overly concerned about fluctuations in commodities, as this is a part of the normal course of business for these companies. Maybe I should be more concerned, but since the company had such great fundamentals and a strong balance sheet, I did not see it as a reason not to invest.

      Hopefully this helps!

      Bert

  7. I like ADM overall, but was surprised you went there instead of NSC, CSX, or UNP – the railroads look so tempting right now and I hope they remain that way. Either way, any of those 4 are great choices, and all of them sit in some position on my list of ‘I want that.’ ADM is in an industry that will only become more and important, and never go away.

    Congrats on the new income,
    Gremlin

    • Gremlin,

      You raise a very valid point and don’t worry, I have not been ignoring the railroad industry and have kept a very close eye on NSC, CSX and UNP. I don’t want to spoil anything, but you may want to keep your eye out for an article that will be coming this week haha

      Thank you for the kind words and the wishes, I am happy to have ADM in my portfolio!

      Bert

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