Archer Daniels Midland (ADM) is not increasing its dividend this season. 0.175 per share. I am disappointed by this news rather. I know that ADM’s earnings were hurt this season due to the drought, so their financial position is not strong at the moment. 2.76B to obtain the whole company.
Given ADM’s financial position, I seriously question whether such a sizable acquisition attempt is a prudent action at this time. The company has raised a little of cash through a tentative deal to sell their stake in Gruma SAB, a Mexican company that manufactures corn flour and tortillas. Presumably, the lack of dividend increase was created to save cash for the potential acquisition of GrainCorp also.
The lack of a dividend increase and the questionable acquisition attempt, along with the income volatility, are making me rethink my investment in ADM. In January When I purchased the stock back, it seemed to be very undervalued, with a P/E of 8.57, P/S of 0.23, P/B of 1 1.06, and PEG of just one 1.17. I even keep in mind seeing a F.A.S.T.
Graph that demonstrated the extent of the undervaluation. However, whatever margin of protection I had fashioned was completed eroded by the wages collapse, since January is -4 in a way that my total come back.9%. It isn’t a big reduction, but I question whether the potential future come back from ADM outweighs the overall risk (of capital reduction and insufficient dividend development). This year I discussed some conditions under which I would consider offering a stock Within a post earlier. Three of the conditions included the dividend being frozen, the company’s fundamentals deteriorating, and the ongoing company making a big change like a major acquisition. Considering that ADM meets multiple conditions, I am giving serious consideration as to whether it will stay in my portfolio. Of course, there is always the possibility that I am overreacting to recent events, so I welcome any thoughts from readers.
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