Investors have always been interested in stocks that pay dividends, but lately, low interest rates on bonds and other fixed-income investments have made solid dividend payers even more valuable. Among the most promising dividend stocks in the market is Archer Daniels Midland (NYSE:ADM), and one big reason is that it’s one of the few exclusive companies to make the list of Dividend Aristocrats. To become a member of this elite group, a company must have raised its dividend payouts to shareholders every single year for at least a quarter-century. Only a few dozen stocks manage to make the cut, and those that do tend to stay there for a long time.
When it comes to the agricultural industry, Archer Daniels Midland (NYSE:ADM) is a giant, with operations throughout the food chain. From collecting and transporting crops to processing food products and animal feed as well as biodiesel and ethanol, Archer Daniels Midland (NYSE:ADM) has a fully vertically integrated agricultural operation. With so much interest in the ag industry having come from high crop prices, the company has both had opportunities to profit and faced challenges to its growth. Let’s take a closer look at Archer Daniels Midland (NYSE:ADM) to see whether it can sustain its long streak of rewarding dividend payouts to investors.
Dividend Stats on Archer Daniels Midland
| Current Quarterly Dividend Per Share | $0.19 |
| Current Yield | 2.3% |
| Number of Consecutive Years With Dividend Increases | 38 years |
| Payout Ratio | 34% |
| Last Increase | February 2013 |
Source: Yahoo! Finance. Last increase refers to ex-dividend date.
Has Archer Daniels Midland (NYSE:ADM) grown or wilted lately?
Even with generally favorable conditions in the agricultural markets, ADM has had its share of troubles lately. Last year’s drought crushed its agricultural service segment last year, seeing a 75% drop in profits as its grain elevators operated well below capacity because of heat-stricken farms that produced far less in crop yields than during normal years. Although improvement is seen coming this year for much of the Midwest and Great Plains, ongoing drought conditions could continue to pressure ADM.
Source: U.S. Seasonal Drought Outlook, National Weather Service.
ADM’s renewable-fuel business grabs most of the attention from investors. The drought has also had a big impact in this segment as well, as ADM has had to idle ethanol production facilities because of low corn supplies following the drought. Moreover, with sugar-based ethanol competitors Bunge Ltd (NYSE:BG) and Cosan Limited(USA) (NYSE:CZZ) already benefiting from pricing disparities between sugar and corn, prospects of potential tariffs on U.S. ethanol in Europe could give Brazilian sugar-based ethanol a competitive advantage, further hurting ADM.
