New Buys: Archer Daniels Midland (ADM) and Cardinal Health (CAH)

Strong macro-economic numbers have pushed the Dow and S&P to new records again. The rising tide seems to lift all boats, making it harder to find undervalued dividend growth stocks.

However, in the past month two existing positions in my portfolio continued to show price weakness – giving me a great opportunity to add more and lower my cost basis in the process.

On November 9 I added 35 more shares of Archer Daniels Midland (ADM) for a total of $1,390.

And on November 29 I bought 25 additional shares of Cardinal Health (CAHfor a total of $1,454.

I refer back to my recent post on Cardinal Health for a more detailed analysis on this dividend growth stock.

My investment thesis remains by and large the same and this new purchase has lowered my cost basis to $67 – about 12% more than the current stock price.

In this post I will cover Archer Daniels Midland, why I liked the stock enough to add more and what both purchases mean for my forward dividend income.

Archer Daniels Midland Company procures, transports, stores, processes, and merchandises agricultural commodities and products.

Its Agricultural Services segment offers agricultural commodities, including oilseeds, corn, wheat, milo, oats, rice, and barley. This segment also provides structured trade finance; and processes wheat into wheat flour.

The company’s Corn Processing segment provides sweeteners, starch, syrup, glucose, and dextrose; bio products; alcohol, amino acids, and other food and animal feed ingredients; and ethyl alcohol. This segment also offers corn gluten feed and meal, and distillers’ grains; vegetable oil and protein meal; formula feeds, and animal health and nutrition products; citric acids and glycols; glucose and native starch; and contract and private label pet treats and foods, and specialty ingredients.

Its Oilseeds Processing segment processes soybeans and soft seeds into vegetable oils and protein meals. This segment offers ingredients for the food, feed, energy, and industrial products industries.

The company’s Wild Flavors and Specialty Ingredients segment provides natural flavor ingredients, flavor systems, natural colors, proteins, emulsifiers, soluble fiber, polyols, hydrocolloids, natural health and nutrition products, and other specialty food and feed ingredients; edible beans; soy proteins, oils, and gluten-free ingredients; natural extracts and compounds; and gluten-free and high-protein pastas.

The company also engages in the futures commission and insurance activities. Archer Daniels Midland Company was founded in 1898 and is headquartered in Chicago, Illinois.

ADM’s current dividend yield is 3.27% –  slightly below the average 3.5% yield I strive for in building my portfolio.

The company is featured on David Fish’s list of Dividends Champions, Contenders and Challengers – boasting a 42 (!) year streak of growing dividend pay-outs.

The 5 year dividend growth is a decent 12.83% – with last year’s dividend growth coming in at 6.67%.

ADM’s Earnings per Share (EPS) over the last five years shows an 3.26%  increase. Projected EPS growth for next year as compared to the current year is 17.6%.

The trailing 12 months Price/Earnings (P/E) is 18.27, which is slightly above it’s 5 year average of 17.94. It is significantly lower than the industry’s 5 year average of 30.52.

EVA Dimensions (an equity research firm) states in their November 29 report that CAH‘s Performance Risk Valuation score is at the 79th percentile of all firms in its industry, which leads to a recommendation to Overweight.

It adds that ADM is more attractively priced in relation to its true value
than well over half of the stocks in its industry

Ford Equity Research recommends a ‘hold‘ with a 12 month range of 52-week price range of $38.96 – $47.02

Jefferson Research concludes that ADM is showing strong Cash Flow Quality, Operating Efficiency and Balance Sheet Quality, and Valuation suggests a lower amount of price risk, but Earnings Quality is weak. When combined, ADM deserves a ‘buy‘ rating.

The additional 35 shares of ADM added $44.80 to my forward dividend cash flow.

Cardinal’s annual dividend of $1.85 per share increased my forward annual dividend income by $46.25. 

 

What do you think about Archer Daniels Midland and Cardinal right now? Are you buying other dividend growth stocks? Leave a comment/reply to share your thoughts!

Dividend Update: October 2017

It’s time for my favorite type of post: a tally of the dividends I received in the prior month. Given my strategy of DGI, it is really the dividend payouts that I care about. For each of the companies I invest in, I like to see a steady and growing stream of dividend payouts.

So how did I do in October?

Last month 12 companies sent me a dividend payout, adding up to a total of $256.

October is typically an ‘off month’ for receiving dividends as the majority of companies tend to pay out in March, September, October and December.

However, $256 is still a nice chunk of change though and adds nicely to my dividend goals for 2017.

The following table shows the tickers of the companies that made a October 2017 dividend payout to my portfolio.

It features the dividend amount I received and any change in payout as compared to the last payout moment.

TickerDividends ReceivedDividend per Share Change
KMB$15.52
DEO$20.199.12%
EQR$10.08
SOUHY$3.2077.78%
CAH$18.50
HASI$16.50
LHO$31.50
STAG$5.88
WPC$70.350.50%
CSCO$29.00
CLDT$11.00
BNS$24.531.07%

 

Some interesting dividend increases across the board here.

Out of the four increases South32 (SOUHY) stands out with an increase almost 78% (!). While that increase looks great, in absolute terms it’s still a minor increase of a minor position.

A more substantial is the 9% dividend increase that come from Diageo (DEO). Reason to crack open a Guiness and celebrate their soon to be opened US brewery.

Comparing the dividend payout of October 2016 to October 2017 (below) shows an increase from $162 to $256- YoY growth of 58%.

 

How was your October and its dividend?  Leave a comment/reply to share your thoughts!