Recent Stock Purchase December 2015

Volatility has once again reared its head as wild market gyrations are presenting us with some interesting dividend investing opportunities. As oil continues its seemingly endless slide, dividend victims are being claimed one by one. Of course, the most recent dividend casualty to hit the dividend investing ranks was none other than MLP favorite, Kinder Morgan, Inc. (KMI). With its recent dividend slash many are wondering whether or not to trim or liquidate holdings in this MLP staple. It’s an interesting question that all dividend investors must face at some point in time as dividend cuts are inevitable the longer you are a dividend growth investor. About a year ago I asked the question, “Do You Sell After A Dividend Cut?” as I documented my real world decision to keep all my dividend cutters courtesy of the “Great Recession.” Those holdings included, General Electric Company (GE) , Wells Fargo & Company (WFC) and Ingersoll-Rand Plc (IR). The point of this discussion is to illustrate that no matter how much research is done prior to making a dividend stock purchase, a dividend, after all, is never a “sure thing.” With that being said, I continue to scour my stock screens as well as my own portfolio holdings for beaten down stocks that still offer a “safe” and sustainable dividend while trading at much more attractive valuations. The only sure thing a long term dividend growth investor can do is to find those stocks and nibble on positions in a consistent manner over time. You may not make your buys at the absolute lows, but you will be building up a position in a hopefully solid dividend payer and raiser at much better values. Sticking to my December stock considerations, it’s no surprise that:

 

I have added to my taxable account 22.4931 shares at $35.57 for a total investment of $800.00 in Archer-Daniels-Midland Company (ADM). With this recent purchase my taxable account holdings in ADM now totals 90.4118 shares for a value of $3,201.48.

 

With another three weeks or so left in 2015 this may be my last buy for the year. Of course, if we experience another massive sell off I may be tempted to make one more purchase. From a dividend income perspective I already call 2015 a success as I have increased my income significantly from last year. December’s dividend income will just be gravy and only raise the bar that much higher for my dividend income goal of 2016.

 

What do you think about my recent stock purchase? Is ADM on your buy list this month? Please let me know below.

 

Disclosure: Long GE, WFC, IR, ADM

37 thoughts on “Recent Stock Purchase December 2015

  1. I am with you on dividend never being a sure thing. Good luck on your new purchases.

    Keep cranking,

    Robert the DividendDreamer
    AKA — Seeking Dividends

    Follow me on Twitter– Seeking Dividends@DividendDreamer

    • Hi dividenddreamer,

      I think we sometimes forget that dividends are never guaranteed. For the most part, we all own very solid dividend payers so when a cut comes it does shock the system a bit. I feel ADM still has a very safe dividend at current levels. It’s just a little beat up now so why not add some more to my holdings. Thank you for commenting.

  2. Big fan of ADM over the long term as more of the developing world grows into middle class which will require more food which is right up ADM’s alley. Lots of companies on my buy list if I get a chance to make a purchase, although I might have to wait until 2016 rolls around to do so.
    JC recently posted…Dividend Update – November 2015My Profile

    • Hi JC,

      Long term I like ADM too for the same reason you mention. Food production/processing is a growing necessity even when commodity prices are depressed. To me it simply signals a better time to jump in and nibble on some more stock especially when yields are at historic highs. As always, I appreciate your comment.

    • Hi R2R,

      No doubt, low commodity prices are affecting ADM in the near term. Of course, many years down the road, the food processing that ADM offers will be an even bigger necessity as our world continues to grow and stay hungry. Thank you for stopping by and commenting.

  3. I bought ADM a few months ago and might take another look at it. As for KMI, the dividend cut hurt. Fortunately, at this point in my life, I don’t need the dividends to live on yet. Since it is in my Roth so I can’t sell for tax-loss harvesting purposes, I’ll just continue to hold for the 20+ year long term, collecting and reinvesting the dividends along the way. The 3% yield isn’t that bad and I guess needed in order to keep the company fiscally sound.
    Scott recently posted…November 2015 IncomeMy Profile

    • Hi Scott,

      Happy to be a fellow shareholder with you in ADM. I think it deserves a look at current levels as the yield, which is very much sustainable, looks a lot more enticing than a few months ago. Regarding KMI, it will be interesting to read what many of the DGI bloggers will decide to do regarding keeping the stock or not. As long as you do not need/depend on the dividend income presently, you are afforded the luxury of getting paid to wait while still getting a very decent yield in a sector that’s still very much a necessity these days. Thank you for commenting.

  4. Good purchase on ADM, seems like a solid company. I own KMI in RRSP so can’t sell it for tax-loss purpose. Yes the dividend cut sucks but it’s a good idea that KMI cut the dividend to stop the bleeding. Will continue monitor KMI to see whether it makes sense to add more to average down our cost basis or not.

    • Hi Tawcan,

      Seems like quite a few hold KMI in a tax advantaged account therefore have no real benefit to sell off their positions. While I don’t hold KMI I would not sell my position given this new revelation. Once I pick a stock for my portfolio I have a very difficult time selling and I think that KMI will come back. It will just take a while. At least the new yield is still pretty decent after the cut. For now, I’m steering clear of energy and focusing on my current holdings that are in the red. Thank you for stopping by and commenting.

    • Hi FV,

      Every time I mention ADM you mention your affinity towards the stock and its future growth potential with the changing demographics in Asia. I fully agree with you. Low commodity prices are hurting ADM these days especially energy related sales in the form of ethanol. Who knew low energy prices would drag ADM down too. Of course, there are other pressures ADM is facing, a weakening of Asian and European economies as well as a strong dollar. All near term headwinds, but the longer term thesis looks brighter. Thank you for sharing your thoughts.

  5. Keith,

    I like ADM here. The valuation is pretty compelling.

    Not my favorite business due to the razor-thin margins and lack of pricing power, but they’ve operated at a high level for a long, long time. And it’s not like their core products are going to be any less necessary moving forward. 🙂

    I initiated a very small position rather recently. Might add to that here. It’s cheaper than it’s been in quite some time.

    Cheers!

    • Hi JF,

      Price, value and yield for ADM are all looking quite compelling these days. One of the reasons I continue to nibble on this dividend growth stalwart. Though ADM may operate on razor thin margins, as you stated, their core products are not going to be any less necessary going forward. The razor thin margins of ADM reminds me of how the large grocery chains operate. In a way ADM is kind of like a supermarket to the world. In the meantime, while a strong dollar, low commodity prices and a weaker Asia and Europe continue to hurt ADM, longer term I like their prospects. As always, I appreciate your comment.

  6. I agree with volatility being a great thing, and I also love the idea of buying when there’s blood in the streets. KMI is going to be my next purchase after the recent drop and dividend cut. That’s a company that’s spent its time and energy trying to grow its dividend, and I believe that they’ll be trying to get it back to where it was once it’s credit situation is taken care of.

    ADM is always a great buy. I have a block of that in my portfolio too.

    Sincerely,
    ARB–Angry Retail Banker
    ARB recently posted…You Morons Must Love Fees!My Profile

    • Hi ARB,

      There’s a lot of blood flowing from KMI these days. Your comment is the most positive I have read online regarding that stock. Most seem pretty soured on it but you seem to have a certain gusto when it comes to buying when everyone wants to leave it for dead. You may very well be on to something as there is not much love for KMI these days. Of course, that’s usually the best time to buy any stock. Good luck with your purchase. Thank you for sharing your thoughts.

  7. Nice buy DivHut. I’m not particularly fond of ADM’s debt or thin margins…..but they have staying power and I love the Ag sector. If the stock keeps going south, I’ll be right there with you.

    Regarding your question of selling when a dividend is cut…..and emphatic no. In fact, I am hoping BHP BIliton (BBL) cuts their dividend soon. I will double my allocation on the news!
    -Bryan
    Income Surfer recently posted…Long Term HoldingsMy Profile

    • Hi IS,

      The razor thin margins seems to be a key issue for some considering buying ADM, but the way I see it that’s the nature of their business, similar to the razor thin margins supermarkets operate under. Still, ADM has a very long history of being in business along with a very long dividend raise history as well. For certain businesses debt seems to be part of their operating environment. I own CAT and many hold DE that are two really great companies that traditionally carry relatively high levels of debt. I like ADM long term because of the sector they operate in and basic world demographics that will demand their products. At current levels, it looks compelling which is why I continue to nibble bit by bit.

      Like you, I have yet to sell a stock after a dividend cut. So far, that strategy has worked out well for me. As long as the business has not fundamentally changed and all that you are seeing are near term headwinds and pain then it may be a great time to load up at depressed levels. Thank you for commenting and sharing your thoughts.

  8. Great buy Keith! ADM is a great company and I initiated a purchase earlier in the year. Honestly, I’m shocked I haven’t bough more as the price continues to fall. I would never have guess it would yield over 3% when I performed my analysis earlier in 2015. Over $3k is a very solid holding. Are you planning on adding any more or are you comfortable with the amount you purchased?

    Bert
    Dividend Diplomats recently posted…Endless Liabilities of Owning a Car Part 3 – $250 EditionMy Profile

    • Hi DD,

      I continue to like ADM at current levels. The price, value and yield are still very compelling and the dividend looks to be very sustainable with room for growth even during these relative hard times. In other words, I would feel comfortable adding to my position going forward. As you can see, I don’t gorge on positions, rather nibble $800 at a time. With those relatively small investment amounts it’s pretty much a given that I’ll add to my ADM if prices stay around these levels or go even lower. It may be worth another look for your own portfolio too since your purchase was made. Thank you for stopping by and commenting.

  9. I like your purchase of ADM… I just recently acquired some shares last week. In regards to KMI, I agree with the commenters who do not plan on selling. The dividend cut was a necessary and good move for the company from a long-term business perspective.

    • Hi ACI,

      Always nice to read about other ADM buys at these levels. I guess I’m not alone in recognizing the value and attractive yield with that stock.

      So far, it seems most are sticking with KMI. I have only read one blog post announcing a total sale of the stock. My own experience with dividend cuts was to keep my shares. Long term, I’m happy I did. Thank you for commenting.

  10. Hi DH,

    I have been flipping ADM in my scottrade account for a while now. I am 3 shares away from 100. What everyone says is true. Thin margins are thin and ADM relies heavily on government tax credit. But ADM has been diversifying itself recently. ADM bought wild flavor and entered the healthy flavor market. They bought seed oil companies to enter the high end oil market. They sold off their profit neutral chocolate factories and just ate eatem foods.

    While ethanol is still 18% of their portfolio, I see ADM moving towards the flavor and oil markets. My only concern is how fast they can synergize the new companies

    • Hi TBDI.

      While ADM operates in a thin margin industry, it has a very long history of operating in a ‘thin margin industry.’ In other words, they have many decades of experience in this type of business and I often compare ADM to many in the supermarket business which also operate on very thin margins. I believe that the current down draft in ADM’s share price is a result of a stronger U.S. dollar, weaker demand from Asia and Europe and, of course, weaker commodity prices overall and not anything fundamentally different or negative in ADM’s operations. I’ll keep adding to my holdings, up to a point of course, as long as the price, value and yield look compelling. Thank you for sharing your thoughts.

  11. DivHut,

    YES YES YES!! Nice – I picked up 50 shares at 34.50 yesterday, and am loving it, no doubt. Cannot wait to experience the dividends and dividend growth going forward, yield is very incredible given the history of where the yield has been. Hope the DGR stays at the height it is at. Congratulations and happy to be a fellow shareholder.

    -Lanny
    Dividend Diplomats recently posted…Bert’s Recent Buy – Norwood Financial Group – NWFLMy Profile

    • Hi DD,

      Great job adding some ADM at those attractive prices. No doubt, ADM will continue to pay shareholders nicely for years to come as the current headwinds affecting the company seem to be short lived when having a long term outlook. ADM is still paying a very safe, sustainable dividend with room for growth at these levels. To me, it looks like a great time to add to a dividend paying stalwart. You could have said the same thing about MCD over a year ago when negativity for the company and stock was at an all time high. No one wanted to touch MCD as it was the ‘old guard’ of fast food and according the headlines did not get the new tastes of younger customers, etc. Of course, fast forward to today and MCD is trading at all time highs as once again it has proven its ability to adapt and maintain its dominance. I feel the same about ADM. Buy when others are selling, right? As always, I appreciate your comment.

  12. I have to confess that you need to some nervs to but in the current market. Admittedly it could be the best time to buy it (slump). I see that decline in commodities and energy prices is a leading indicator of coming slowdown and swing in the market.

    • Hi Fi,

      I have been a dedicated dividend growth investor since 2007. I like the long term passive cash flow that this strategy can provide as well as room for potential capital appreciation over a couple decades or more. That being said, I do not fear or feel that I possess some special nerve to invest during these times. I simply look for stocks that trade at good value and provide a decent sustainable and growing dividend. I own a few dozen stocks to mitigate any potential disaster to my overall portfolio and have lived through a major decline during the 2008 – 2009 crash. That drastic decline was not pleasant to go through as my entire portfolio was deep in the red. All I did was continue to invest every month as I always have during those “dark” investment days. If a slowdown does occur and the market will take another major dive, I’ll simply continue to buy as I always have. The reality is that if a majority of my portfolio holdings go bankrupt or otherwise cease to exist, we are all in deep trouble and no index fund will be spared either. As you mention, the best time to buy is during a slump and with ADM’s case it certainly looks to be in a slump. Thank you for stopping by and commenting.

    • Hi Fi,

      As an exercise to measure performance between my portfolio and the S&P it would be interesting but would have no impact on my investing method as my primary concern with my portfolio is to build a growing passive income stream and not just capital appreciation nor chase short or long term performance. Thank you for commenting.

  13. If you’re looking for cyclical dividend opportunities, you might want to start considering the resource sector. Not a typical sector to consider for dividends, valuations are starting to look very attractive, and the multiples of many companies are now starting to look silly cheap.

    Countries such as Canada and Australia typically offer the best opportunities as they have the biggest offering to choose from. I personally like mid cap producers – if you’re selective and look for quality, you should easily be able to find companies that will pay 4-5%+ divi, with exceptional capital growth prospects when the sector finally turns. I wrote a little bit about the sector as a whole here for anyone interested:

    http://thenudeinvestor.com/commodity-markets-time-to-buy-or-run

    Buying low and selling high is the way to make money in the stock market. If you can pick up a decent divi along the way – all the better!

    • Hi TNI,

      Your last line is very well said, especially regarding the dividend to juice returns. There’s no denying the amazing cheap valuations and high dividend yields many companies in the materials sector are sporting these days. Clearly, if one is looking to buy low and sell high these are the days to start nibbling on those material and energy stocks. If you look at my portfolio you’ll notice that I do not particularly like to invest in very volatile sectors, energy, materials and technology to name a few. The closest I have to a commodity play is ADM and DOV but those are by no means pure plays in the commodity and energy sector. Thank you for sharing your take on the space though. I know that most in the dividend growth world already own and are looking to add stocks in the materials sector for the exact reasons you outline. I may nibble in the space one day, but I do value my sleep as well. As always, I appreciate your comment.

    • Hi BSR,

      Dividend cuts are sometimes those bumps in the road that we must go through if on the other end the company comes out stronger and better capitalized. I went through it with my holdings in GE, WFC and IR and simply held on and added to those positions as they slumped. It’s just interesting for me to read who is selling, who is holding and who is adding to KMI during these “dark” days for the stock. In the meantime, I have a few positions of my own going through their own slumps that I am focusing on today. Thank you for stopping by and commenting.

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