Friday, November 13, 2015

Weekly Purchase 10 - ADM


Today, I initiated a new buy on ADM. Normally, I would wait until Monday to look at the market and use the weekly Sharebuilder plan to buy on Tuesday. I bought early because the ex-dividend date is November 16th and I wanted to capture dividend payment in December. Moreover, ADM appeared in my screen for the last two months.


Details of transaction:


Action
Security
Price
Quantity
Amount
Buy
ADM
$38.28
26
996 +fees


The yield is close to 2.96% which increases my forward yearly dividends by $29.12.


About  Archer Daniels Midland Co. (ADM)


You can read more about ADM here:
http://www.wikinvest.com/stock/Archer-Daniels-Midland_(ADM)


Criteria Table


ADM 11/2015
Area
Criteria
CheckList
Comment
Quality Company
Dividend Growth
>5 years
Yes
40 Years
ROE/Op Margin
Stable
Yes
Stable
Long term Avg Growth
Stable
Yes
Stable - but low short term growth
FCF over Dividends
Yes
Yes
FCF covers Dividends
M* Moat
Wide Moat
No
M* Narrow
M* & S&P
Credit Rating
> BBB+
Yes
BBB+
Cash to Debt & Interest Coverage, Debt to Equity
Cash Debt >1 or Interest Coverage > 5
Yes
Cash to Debt 0.17
Interest Coverage 8.49
Debt to Equity 37.94
M* & S&P Stars
> 3 Stars for both
Yes
M* 4 Stars
S&P CapIQ 3 Stars
Payout Ratio
<60%
Yes
29%
Dividend Growth
& Yield
Dividend Yield
>3%
Close
2.96%
Dividend Growth
>5%
Yes
11.40%
Chowder
>8%
Yes
14.36%
Valuation
Yield/Avg Yield
>1.1
Yes
1.17
Dividend Yield Theory Mid Point
Below Mid Point
Yes
Mid Point 56.
Low Point 37
P/E
Below Mid Point
No, but Forward P/E (11)  < Median
Median 12.94 Current 13.04
DRRM
~10%
No - but okay with 8% for ADM
Assuming 6% growth; projected return=7.97%
M* Estimate
<M* est
Yes
M* 49
S&P Estimate
< S&P cap IQ est
Yes
S&P Cap IQ 45
Note: Data from Gurufocus, Google Finance, Yahoo Finance, M*


Per the current quarter results, ADM missed on the earnings. So, why am I buying? (I also bought CMI recently with negative earning results). This is a new position for me. I am pretty certain that the dividends are okay in the short term. And long term, no problem. 40 years of continuous dividend growth can’t be beaten.


I will add more ADM if we dip into the low 30s and average down.


Fair Price Calculation


I use the dividend yield theory, PE analysis and DDRM for fair price calculation. Based on these methods, I estimate the fair price to be around $43. Therefore, I believe ADM is trading close to or just below fair value.


That's it for now! What do you think of ADM?

D4s

8 comments:

  1. Excellent purchase. Ive been watching it after the 5% fall yesterday (or was that day before yesterday?) and sure would love to pick up some shares at these levels myself.

    R2R

    ReplyDelete
    Replies
    1. Thanks R2R! I was planning to buy in the low 40s, so the further drop was good. In any case, I look to add more if the market drops it further.
      D4s

      Delete
  2. D4S,

    Great purchase, I know if Bert saw this he will be pumped, as he is a big ADM lover. Nice aristocrat, great yield, great dividend player. Nice job!

    -Lanny

    ReplyDelete
    Replies
    1. Lanny,
      The bad quarterly results really hammered the stock price. I have been eyeing ADM for a few months (per my screener) and was willing to buy in the low 40s. I just had to pull the trigger when it dropped further and to capture the dividends next month. My December dividends should be excellent!
      D4s

      Delete
  3. Good buy D4s. I bought ADM at 43 and flipping it whenever i can. Short term pain for long term growth!

    ReplyDelete
    Replies
    1. Broke Div Investor,
      My entry point was actually below 43 so I guess the market gave me a few month cents of discount. I'll add more if it dips further.
      Thanks for your comments!
      D4s

      Delete
  4. The catching knife method is great! buying at the big dip. You even make it sweeter by capturing the dividend prior to the ex-date. Great work, bro!

    ReplyDelete
    Replies
    1. Vivianne, Thanks for your comment. The problem with the catching the falling knife is that it can cut you! But my plan is to buy more if it dips into the low 30s since I think ADM should be okay in the long term.
      D4s

      Delete