Archer Daniels Midland ( ) is one of the world’s leading agribusiness companies, with significant market presence in agriculture processing and merchandising. ADM has approximately 230 plants location worldwide. It is one of the world’s largest processors of agricultural commodities, such as oilseeds, corn, wheat, protein meal, corn sweeteners, flour, biodiesel, ethanol, and other food and feed ingredients.
ADM is a dividend aristocrat and has been raising its dividends for last 34 years. The most dividend increase was in February 2009. I view ADM in dividend portfolio as a proxy for commodity asset class. Considering the recent turmoil in commodities sectors, my objective here is to analyze if ADM still continues to be a good dividend growth stock and how does it rate on my scale of risk-to-dividends.
Trend Analysis
Here I am looking at trends for past 8 years of corporation’s revenue and profitability. These parameters should show consistently growth trends. The trend charts and data summary are shown in images below.
- Revenue: In general, a growing trend since 2001. The average revenue growth for last 9 years is 21%.
- Cash Flows: Very erratic operating cash flow with significant reductions since 2005. Negative in 2007 and 2008. Same trends fro free cash flow. Not a good observation.
- EPS from continuing operation: In general, increased trend, with exponential growth between 2004 and 2007.
- Dividends per share: Consistently growing dividends since 2000 (and before than since last 34 years).
ADM: Trend Analysis
ADM: Data Summary
Risk Parameter Calculation
Here I use the corporation’s financial health to assign a risk number for measuring risk-to-dividends. The risk number for risk-to-dividends is 2.14. This is a medium risk category as per my 3-point risk scale.
