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Investors who want to cash in on Archer-Daniels-Midland Company’s (NYSE:ADM) upcoming dividend of US$0.35 per share have only 3 days left to buy the shares before its ex-dividend date, 15 February 2019, in time for dividends payable on the 12 March 2019. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Archer-Daniels-Midland’s latest financial data to analyse its dividend attributes.
Check out our latest analysis for Archer-Daniels-Midland
5 questions I ask before picking a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share amount increased over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Will it have the ability to keep paying its dividends going forward?
How well does Archer-Daniels-Midland fit our criteria?
The current trailing twelve-month payout ratio for the stock is 42%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 36% which, assuming the share price stays the same, leads to a dividend yield of 3.4%. However, EPS should increase to $3.45, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. ADM has increased its DPS from $0.56 to $1.4 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes ADM a true dividend rockstar.
Compared to its peers, Archer-Daniels-Midland has a yield of 3.4%, which is high for Food stocks but still below the market’s top dividend payers.
Next Steps:
With these dividend metrics in mind, I definitely rank Archer-Daniels-Midland as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three relevant factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for ADM’s future growth? Take a look at our free research report of analyst consensus for ADM’s outlook.
- Valuation: What is ADM worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether ADM is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.