2016 is moving right along with triple digit moves in the DOW occurring almost every day. In a word, volatility is here to stay. Of course, as any long time dividend growth investor already knows, volatility tends to equate to opportunity. Opportunity to initiate new positions at better prices, value and yields and opportunities to average down on positions already in our portfolios. We are already very familiar with the sectors that have been beaten down in the last year including every energy related company, Canadian banks and cyclical industrial names moving towards a trough in the economic cycle. These are the opportunities being presented to us today. These are the volatile names that are currently sporting historically high yields and below average PEs. Of course, my take on these sectors and individual stocks within each comes down to one thing, dividend sustainability. As long as there is sufficient cash for dividends to continue to be paid and even better, raised, I’ll happily add to my positions at these lower prices and get paid to wait. With that being said, let’s take a look at my recent February purchase.
I have added to my taxable account 73.0000 shares at $32.36 for a total investment of $2,362.28 in Archer-Daniels-Midland Company (ADM). With this recent purchase my taxable account holdings in ADM now totals 174.4118 shares for a value of $5,942.21.
With ADM sporting a historically high yield of 3.52% along with a current PE of 11.4, which is well below it’s five year average PE of 15.6, I’ll be a buyer. The dividend is currently quite safe with a payout ratio of 44.9% which means 2016 payouts can continue with room for growth. In fact, ADM just raised their dividend 7.1% last week which marks four decades of dividend increases during all types of economic cycles. Just think of the inflationary and deflationary events of the last four decades, economic growth and recessions, wars and terror activities around the globe, record prices for commodities and crashes in prices along with double digit interest rates and a period of zero percent interest rates. ADM delivered.
Today, ADM is facing major headwinds in the form of low corn prices, a strong U.S. dollar and weak demand for its products from Asia and Europe. Earnings have and will continue to take a hit. Things are and will continue to look ugly for ADM. Of course, these are the times you want to load up on a dividend stalwart, when everyone else is turning their backs.
What do you think about my recent buy? Is ADM or another stock on your February watch list? Please let me know below.
Disclosure: Long ADM
Looks like a solid buy here DivHut. ADM is definitely attractive at the current valuation and the dividend hike of 7% was great to see and very encouraging. I don’t own any shares of ADM but it would be high on my watch list if I had capital available for purchases.
JC @ Passive-Income-Pursuit recently posted…Weekly Roundup – February 6, 2016
Hi JC,
I’m all about averaging down on positions in my portfolio if I still believe in them long term and they are selling at much better prices, value and yield. ADM is as solid as they come in terms of dividend growth and so far in 2016, despite serious headwinds, they are continuing to deliver. As always, I appreciate your comment.
Just had a quick peek at your portfolio, seems like a very strategic move to add some ADM! Smart move DivHut.
Team CF recently posted…January 2016 Dividend Update
Hi TCF,
When a consumer staple name like ADM goes on sale I’ll nibble on it. Other consumer staples like PG, KMB, KO, PEP and GIS always seem to be priced a little on the expensive side which makes it difficult to add to the sector. I like investing in companies with growing dividends and ADM certainly fits the bill. Thank you for stopping by and commenting.
ADM hasn’t quite made my buy level, but if it goes much further I may be joining you. I owned shares in ADM from 2008 until about a year ago. Good luck on your investment! Have a great week
-Bryan
Income Surfer recently posted…Humble Investing
Hi IS,
After a big price drop last week I was tempted to average down and add to my current holdings. Of course, getting a historically high yield in the meantime doesn’t hurt either. Thank you for commenting.
No insight on ADM, Keith, but Laura Beth did a nice article on you. http://howtogetrichslowly.com/dividend-investing-passive-income-insight-from-divhut/
Keith says that if he could go back in time, there is one thing he would do differently to ensure a better financial future for himself and his family:
“Start dividend investing earlier.”
It’s like you read my mind. 🙂
Hi KeithX,
I think ADM is worth a look at these levels. It has been beaten down pretty bad the last year and is now sporting some attractive value and yield in a sector that will be in demand for the foreseeable future. I saw that piece Laura Beth did. Nicely put together. I had no idea it would be such an elaborate post.
“Start dividend investing earlier.” As you know, time is the only ally of a long term dividend growth investor. Thank you for stopping by and commenting.
Cant go wrong buying ADM at these levels. Nice purchase, DivHut.
R2R
Roadmap2Retire recently posted…Chatter Around the World – 134
Hi R2R,
Thank you for your continued encouragement regarding my recent buy. As you know, I value the opinions of all comments, good, bad or otherwise. Who knows what ADM will do in the near term. All I do know is that at its current level it’s trading at very attractive prices, value and yield. As always, I appreciate your comment.
DH,
You asked what we think of ADM, I think people will always need to eat. Sure ADM provides more than just that, but man they are a solid company. I might be adding to ADM or BNS tomorrow, using my free buy in my account before it expires. Its a tough call. Nice move, and a strong one at that!
– Gremlin
Dividend Gremlin recently posted…January, Review / February, 2016 Preview
Hi DG,
Investing in a consumer staple like food products and processing is a good long term bet which is why I like ADM at current levels when most are selling. As I mentioned in the post, the ugly times for ADM are here to stay for a while which is precisely why I am adding at current levels. Getting a historically high yield and good value is not a bad trade off while things recover down the road. Thank you for sharing your thoughts.
Great buys! just over a year ago, P/E of everything seems to be >20, now everything is dropping to the teen. Financial and insurance company is <10. CNBC is saying a lot of hetch funds are dissolving, investors are withdrawing money from the market in dove. They did exactly like what happen in 2008-2009 and missed some of the biggest gains/rebound in the century.
Hi vivianne,
There’s little doubt that money is flowing out of the market these days. Many are quite afraid of seeing their investment portfolios decline in value and are selling out. As you stated, these days there are many, many stocks trading at below the S&P market PEs and below five year average PEs for individual stocks. Of course, all this means for long term dividend investors is that there’s an opportunity to add some high quality names at much better prices and value. Of course, the number one thing to look for is a sustainable dividend which, despite the rough times ADM is facing, I decided to add to it as the dividend remains quite safe. Thank you for stopping by and commenting.
Wow, you have a decent amount of ADM. Those shares should bring you very nice cash flow in the months of Mar, Jun, Sep and Dec. I just bought more, but not quite in your numbers. Dividend has been just raised and ex-dividend date on Thursday this week. Great time to buy if you ask me.
BR, DL
Dividend Lord recently posted…5 Recent Buys – ENB, ADM, GILD, MMM, NOK
Hi DL,
I feel comfortable with my total holding of ADM and still may add more if prices remain weak. I added a very small amount to ADM towards the end of January and after a big drop last week in price decided to add more. The dividend of ADM is still quite safe based on current cash flow and is not in any danger of being cut or frozen. As long as those conditions are met I may continue to average down. Thank you for commenting.
Seems like a solid company, DH. I’ll be watching it for a while from the sidelines though. I’m trying to build up my cash reserves in our Roth accounts and want to reevaluate overall allocation in my IRA. Otherwise, I might be tempted to add a little ADM. I do have it flagged to look again if it hits $30 though. That would be a big drop, I know… but one can hope. If I wasn’t an old guy, I might not be as cautious, but the overall market is making me a little jumpy.
Dividend Gravy recently posted…January 2016 Dividend Update
Hi DG,
You have to feel totally comfortable with any investment you make. It may be a risky high yield stock or some micro-cap you feel like rolling the dice. The bottom line, it’s OK to wait for your price. Will ADM get to $30? Who knows. It might and it might not but in your situation you have to feel comfortable with every purchase you make. While ADM is facing a lot of headwinds these days and earnings have suffered as a result, the dividend remains quite safe for the foreseeable future. As I mentioned in the post, ADM has already been through many economic cycles and has continued to pay and raise dividends for over four decades. That says a lot about management. As always, I appreciate your comment.
ADM is really solid (no position, yet…)
Just wanted to say I love the way you carry out 73 shares to four decimal places. That’s sub penny precision.
Financial Velociraptor recently posted…Write Puts Microsoft Corporation (MSFT)
Hi FV,
Every time I mention ADM you always write a positive comment about the stock and the sector. Adding to its solid mystique was a nice 7.1% dividend increase despite the numerous headwinds the company is facing.
Since all my shares are to four decimal places I just wanted to remain consistent with this recent buy as well. Thank you for stopping by and sharing your thoughts.
Hi Keith,
nice purchase, very solid company I also have it on my watch list and I will add it very soon to my portfolio.
Keep investing!!
Div.Income recently posted…Portfolio Update January
Hi DI,
It just seemed like a good time to average down my position in ADM especially when the company announced a pretty generous dividend raise. It’s in a sector that will remain very much in demand for the foreseeable future and sports a very healthy annualized dividend growth rate too. Thank you for commenting.
You can never go wrong with farming stocks. No matter how technologically advanced and digitally connected we all become, we still gotta eat.
Sincerely,
ARB–Angry Retail Banker
ARB recently posted…Anjali Ramkissoon, Alicia Ann Lynch, And Living The Brand
Hi ARB,
I talk about your point with Mrs. DivHut a lot. As amazing and connected the world has become there are still some things that cannot be digitized. As long as we will be biological there will always be a need for ADM products and services. That’s a comforting thought when looking to invest for multiple decades in a rapidly changing world. As always, I appreciate your comment.
Solid by DH and at a good price. It’s a company I have my eye on as well.
Hi IRtF,
Thank you for your words regarding my recent buy. As long as ADM remains at these depressed levels or lower it will continue to catch my eye. Thank you for commenting.
Nice purchase in this sector. I don’t hold this stock or anything else in this sector. I should look into this sector more closely.
Thanks for sharing.
DGJ
Dividend Growth Journey recently posted…Sharebuilder Purchase – 2/2/2016
Hi DGJ,
I still think that ADM is a stock that any long term dividend growth investor should consider for their own portfolio. While not operating in the most ideal climate these days, ADM does sport a fantastic dividend growth history and currently offers a very safe yield. For my money, that’s good enough. As always, I appreciate your comment.
With ADM facing headwinds and declining earnings the stock is unloved definitely the right time to buy.
Will add to watchlist . thanks for sharing
Dividend Force recently posted…January 2016 Dividend Income
Hi DF,
We always talk about wanting to buy quality names on sale, yet when they do go on sale many are afraid to pull the trigger. While the future for any stock is always uncertain one thing that a long term investor can do is simply take the information of the present to make a decision based on those facts. As I stated in the post, ADM is currently facing and will continue to face a harsh economic climate which will only provide anyone willing to take a chance on it better prices, value and yield in the meantime. Of course, time will tell if the buys of today will be beneficial or not. Thank you for sharing your thoughts.
DivHut,
I don’t know why it took me so long to add you to my investing blog favorites. You always seem to be watching or buying the same things that I’m thinking about. Although I haven’t yet grabbed any ADM, I plan to in the near future. Their stock is very undervalued in my opinion and just as you said, that’s the time for any true DGI to take a grab at it. I except this stock to have a few ups and downs in the near future but I think that given its strong history and a good head at the helm of the ship, it’ll do just fine down the road.
Thanks for the review,
-Dividend Monster
Dividend Monster recently posted…Money Saver: Auto Choice
Hi DM,
As long term dividend growth investors we are always looking for “sale” prices in some quality stocks. These days, there’s plenty of choices in that department. While the market and world economies are shaky at best these days I will continue to make at least one monthly buy as I always have and slowly build up positions in beaten down stocks that offer attractive yields that are sustainable. ADM, among other names are selling at some pretty attractive levels these days. Thank you for commenting.
Nice purchase, DH. I also bought ADM last week at $33.00 and you beat it by few cents 🙂 its a solid buy. With market volatility, I’m adding them slowly as most stocks seem to touch newer lows almost daily. Keep racing!
Race2Retirement recently posted…Recent Stock Purchase I – February 2016
Hi R2R,
It’s tricky to try and time certain buys, especially these days when market volatility is the norm. A great buy one day may seem like a bad buy when you see a stock drop 5% or more. All you can do is nibble on positions and make sure you keep some cash to take advantage of those notorious sharp declines that we have been seeing for a while. As always, happy to be a fellow shareholder with you in ADM. A few pennies here and there and dollars even won’t make all that much difference in ten or twenty years. The fact you made a buy is all that counts. Thank you for stopping by and commenting.
When you spell it out like you did, ADM seems like a great pickup. While I do believe prices will continue to drop across the broader market, there is little doubt to me that it bounce back nicely over the long haul. Good job on averaging down and taking advantage of the volatile market.
Special Agent Dividend recently posted…Recent Buy: Bank of America BAC
Hi SAD,
Some of the best times to add to solid companies are when they are being sold off. These days, there’s not much love for ADM with slim margins and multiple headwinds in the near term. Of course, because of these headwinds we are offered better prices value and yields in exchange. As long as there is enough cash for the dividend to continue to be paid I’ll gladly add to my holdings at these levels. Thank you for stopping by and commenting.
DH,
I think ADM is a fantastic company and is one that I want to own. Will Apple still be selling products 30 years from now, who knows? Will the worlds population still be eating food that ADM touches in some way, I would bet on it. Adding that relatively safe income to your plan has to feel really good. Nice job.
btw. thanks for being the first from the Div Community to post on my new blog…I appreciate it!
Hi ODOT,
Your comment highlights why my largest sector holdings are in the consumer staples space. Tech companies may come and go but the staples are here to stay for the foreseeable future. As long as ADM is trading at these low levels sporting a safe relatively high yield I’ll continue to keep it on my watch list.
I appreciate you stopping by and commenting. I always love finding new dividend blogs and seeing where other people invest for passive income.
haha, ODOT…..I’m trying to come up with a mascot / logo for the site and I want to name him/her Odot.
Have a great day,
Chad @ Our Dime Our Time recently posted…Dividend Income Update – January 2016
Hi ODOT,
How about ODOT the Otter? Just my 2 cents!
Hey DivHut,
Great purchase!
Glad we draw the same conclusion here: All things considered, ADM is trading at a price best described as ‘an offer you can’t resist’!
Best wishes, DfS
Dividend for Starters recently posted…Recent buy – February 2016
Hi DfS,
I have been making monthly buys for many, many years now during all market conditions and when I see ADM trading at current levels it just looks too good to pass up. I realize that the market is on shaky ground and prices may go even lower in the near term but my main concern is a safe, reliable and increasing dividend which ADM has. Seems like others are also taking the ADM plunge among other names in recent days and taking advantage of great current yield and low value. As always, I appreciate your comment.
Great job on averaging down your cost basis in a dividend stalwart such as ADM. ADM is certainly trading at a good price recently. Any company that can deliver through rough times is a company worth having in a portfolio given the fundamentals of the company have not changed. The only problem I find is that these great companies are usually trading at a premium; good quality companies usually come at a cost.
A Christian Investor recently posted…Bought On Loyal3: AXP, TGT, VFC
Hi ACI,
Great companies usually trade at a premium for a good reason. I had mentioned that I would love to add to my consumer staples as they have remained rock solid throughout January and February in terms of generally maintaining their stock prices. Names like KO, PEP, PG, CL, CLX, UL and more did not suffer as badly as the other sectors. Of course, all those names mentioned are not exactly cheap but they do let you sleep well at night. In the meantime, I’ll continue to average down my positions in names like ADM, EMR, DOV, CAT and the Canadian banks. Thank you for commenting.
A lot of dividend investors are buying ADM lately. I see good values from ADM that has been around decades. Congrats on adding another solid company Divhut! Great job!
Cheers!
BeSmartRich
BeSmartRich recently posted…My recently purchased gold stock Orvana is up by 63% (+$1,600). Should I sell it or hold it?
Hi BSR,
It’s no surprise that ADM has been a popular buy in recent weeks among our DGI community. Anytime you have a dividend stalwart trading at these low valuations and near record high yield people will pay attention. Of course, despite the tremendous headwinds ADM is currently facing the dividend remains quite safe and shareholders were also rewarded with a nice 7.1% dividend increase recently. Put it all together and you get a popular name among the dividend bloggers. As always, I appreciate your comment.
Hi DivHut,
great buy. I Inserted it into my whatchlist waiting for a more deep analysis. Shares are really cheap right now but i think that we’re not out of the hurricane yet.
Keep going!
Hi Luca,
I totally agree with you that we’re not out of the woods yet. I have a feeling that extreme volatility will be with us for some time which can only create better buying opportunities for us. Of course, I’m not a market timer so I, along with everyone else, really don’t know when normalcy will return. All I can do in the meantime is continue to pick up shares trading at great value and yield in the present and make sure the dividend remains sustainable. Thank you for stopping by and sharing your thoughts.
Went is as well – at 32.65 with a small position. Excellent buy and excellent article :).
Hi Sebastian,
Glad you got the chance to jump aboard this great long term dividend payer. It seems that anywhere in the low $30s is a great entry point for ADM as the yield and value offered is quite compelling. Thank you for sharing your position with us.
ADM excellent choice. I also added ADM to my portfolio at around $32.15. ADM is a dividend aristocrat!
Hi JG,
I like ADM long term and was happy to buy near their lows and be able to average down my cost. The dividend is still very safe going forward and they already had a nice dividend raise in 2016. Dividend aristocrats are definitely in a league of their own. Thank you for stopping by and commenting.
I have an addiction to dividend investing. Now that I’ve found out about your site,I will surely keep in touch! The market is overvalued and keeping cash till the market corrects is the best thing to do now.
Hi JG,
I know what you mean about being addicted to this investing method. Sometimes I feel like every extra dollar I have should be put towards some stock or when I’m at the market I like to buy products from companies that are in my portfolio only. I agree with you that the market is getting a little rich but I do not try and time the market to find the “best” time to invest. I make sure I make regular purchases every month no matter the market conditions. Thanks for the reply.