Archer Daniels Midland: Dividend Hero With 49 Years Of Increases

Key Points

• ADM has a secret weapon for attracting investors: A long history of dividend increases.
• Fundamentally, the stock remains sound, with a three-year earnings growth rate of 31%
• Wall Street expects earnings of $6.83 per share, up 32% from 2021.

Amid the volatility in commodity prices since Russia’s invasion of Ukraine in February,  established large cap Archer-Daniels-Midland NYSE: ADM and new company Forafric Global NASDAQ: AFRI appear set to capitalize on continued uncertainty.

Some analysts warning of winter food shortages in Europe, and in the U.S. we’ve seen inflation-driven buying focused on basic staples. That means some agricultural, food processing stocks and packaged food stocks have been performing well. 

Whereas a young, volatile, speculative stock like Forafric can pop up on screens identifying fast movers (which is how I found it), ADM shows up differently. This is a multinational food processing and commodities company, founded in 1902. 

ADM has a secret weapon for attracting investors: A long history of dividend increases. 

Its market capitalization is north of $45 billion, and it’s a component of the S&P 500. 

Although it’s an old-line company, it’s been in growth mode lately, advancing 4.88% in the past three months and 21.04% year-to-date. 

That rally fizzled lately, along with the broader market. Archer-Daniels-Midland slumped 11% in the past month. A potentially constructive chart pattern broke down after the stock rallied to a session high of $92.26 on on September 9 in heavier-than-average turnover.

Shares are down nearly 13% since then. 

Fundamentally, the stock remains sound, with a three-year earnings growth rate of 31% and a three-year revenue growth rate of 15%. 

According to MarketBeat’s earnings tracker, the company has exceeded both top- and bottom-line views in each quarter since January 2021. 

When ADM reported its second quarter in late July, the company earned $2.15 per share, a year-over-year gain of 62%. Earnings growth accelerated in the past three quarters. Revenue was $27.3 billion, an increase of 19%. 

For the full year, Wall Street expects earnings of $6.83 per share, up 32% from 2021.

In the earnings call, CEO Juan Luciano reiterated the company’s guidance for operating income to grow between 15% and 20%. 

As with many well-established large caps, ADM is a dividend hero. The company has increased shareholder payouts for an astonishing 49 years, as you can see using MarketBeat’s dividend data on the stock. 

The stock’s dividend yield is 1.99%, which is not terrific, but it’s at least some incentive to hold shares during a market downturn or stock-specific selloff. Also, the long history of consistent dividend increases is an attractive factor. 

The stock closed at $80.57 Friday, ending the week and the quarter below its 200-day moving average.

Within the grain and commodities-related food industry, ADM and tiny, young, speculative Forafric are the best price performers. 

Never heard of Forafric? That’s understandable. It’s a completely different type of stock than ADM.

Forafric is a very small company, with a market cap of $300 million, that went public via a SPAC merger with Globis Acquisition Corp. That makes it the first African agribusiness company and the first Morocco-based company to list on a U.S. exchange.

It began trading under the AFRI ticker in June.

Forafric is in the business of milling flour and semolina, and processing grains into products such as pasta and couscous. 

The company operates 12 industrial units and 2 logistics platforms. It exports its products to more than 45 countries around the world. The company has plans to expand in Morocco and throughout Africa, and one of its goals is to increase food security in its home continent.

It’s a laudable goal, and with Africa’s population growing at high double-digit rates, it’s not difficult to see the potential. 

The stock is up 44.41% in the past three months, outperforming essentially everything. The one-month gain of 8.83% is perhaps even more impressive, as the broader market basically went into freefall recently.

Despite those gains, Forafric is currently a speculative stock, as it’s very small, has a short trading history and essentially no institutional ownership to speak of. 

Eventually, it might grow into a more stable stock to consider, even if its market cap remains small, but it’s not there yet.