ADM – Stock Analysis for Dividend Growth Portfolio

ADMlogo2This article originally appeared on The DIV Net, on July 9, 2009.

Archer Daniels Midland (ADM) 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.

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Commodity Asset Class in Dividend Growth Portfolio

One of basic tenets of portfolio construction is following the principles of asset allocation. This is much more applicable and valid for do-it-yourself individual investors. In this context, at a minimum, I need to look at and at least consider evaluating all possible asset classes. While doing this, I also have to keep in mind that my portfolio is based on dividend growth philosophy. Among others, a commodity is also one asset class which I believe I should be investing. The next question is what should be my investing vehicle.

Since 2001, quite a few commodity index based Exchange Trade Funds (ETF) and Exchange Traded Notes (ETN) were introduced in the market. There are more than 30 commodity ETFs/ETNs of various flavors based on agriculture, raw metals, coal, water, oil, natural gas, gold, silver, different combinations of these in index format, etc. And how can we forget, the biggest sham of all investment vehicles, futures-based index ETFs/ETNs. My viewpoint is, futures-based index are just designed for speculation. As it always happens, during the speculative boom of late 2007 and early 2008, every month a commodity ETF or ETN was launched in market in one form or other. continue reading rest of the article….

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