In the latest quarter, the company’s profits rose 22%, and it expects the bullish profit outlook to continue, based upon American farmers buying more high-margin seeds that have been genetically modified to boost yields and protect against pests that damage those yields.
Tracking competition
Monsanto Company (NYSE:MON) offers the smallest dividend yield when compared to rivals. Over the last 10 years, the company has been increasing its dividends with a very prudent payout ratio. E I Du Pont De Nemours And Co (NYSE:DD), on the other hand, has shown stability in its dividend amount paid to shareholders with a reasonable payout ratio.
| Indicator | DuPont | Dow Chemical | Monsanto |
|---|---|---|---|
| Price/Earnings ttm | 20.5 | 38.8 | 21,6 |
| Price/Book | 4.1 | 2.4 | 4.3 |
| Net Income Growth (3 Yr Avg.) | 16.7 | 22.2 | -0.8 |
| Revenue Growth (3 Yr Avg.) | 8.9 | 8.2 | 4.9 |
| Dividend Yield , % | 3.25% | 3.98% | 1.41% |
| Debt/Equity | 0.9 | 1.1 | 0.2 |
| Return on Equity | 42.7 | 5.4 | 21.6 |
| Current Price | $ 53.57 | $32.35 | $98.75 |
*Data from Morningstar on June 27
The same cannot be said of The Dow Chemical Company (NYSE:DOW), which has had to cut back on its dividend payments on numerous occasions and has stretched its payout ratio to meet shareholder’s attention.
E I Du Pont De Nemours And Co (NYSE:DD) outperforms in terms of revenue growth over the past three years due to structural changes in its business. This company has the undervalued stock of the three, but shows potential for improvement based on its performance. The Dow Chemical Company (NYSE:DOW), on the other hand, has been able to earn more profits from its sales as it struggles to regain composure in the face of stiff competition. Monsanto Company (NYSE:MON) and Dow Chemical are both struggling with their ROEs, while E I Du Pont De Nemours And Co (NYSE:DD) has a clear-cut advantage in this metric.
Final thoughts
DuPont and Dow Chemical realize that it would be wise to diversify out of the chemical sector and tap into the agricultural sector. Monsanto, however, made this step decades ago, giving itself the benefits of experience, timing and the first mover’s advantage. The primary point in Monsanto’s business is the strong earnings over the past year. The drought has provided this agricultural giant with an opportunity to sell seeds that can work with very little water. While DuPont also provides such seeds, Monsanto’s higher market share and presence help it secure higher revenue than that of its competitors.
DuPont has just recently started eating into the agricultural market and is expanding its market share. For the coming year, the drought-resistant products are bound to be successful due to Monsanto’s sole focus on engineering a successful seed. DuPont might prove its traditional capability of providing quality products in its latest venture and become the closest competitor of Monsanto in the near future, but not today. That is why currently Monsanto is undoubted my pick of the three stocks.
The article Which Chemical Giant Can Make You Really Rich? originally appeared on Fool.com.
Marina Avilkina has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Marina is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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