- ADM has a secret weapon for attracting investors: a long history of dividend hikes.
- Fundamentally, the stock remains healthy, with three-year earnings growth of 31%
- Wall Street expects earnings of $6.83 per share, up 32% from 2021.
Amid the volatility in commodity prices since the Russian invasion of Ukraine in February, a large market capitalization has Archer Daniels Midland (NYSE: ADM) and new company Forafric Global (NASDAQ: AFRI) appear to be benefiting from the ongoing uncertainty.
Some analysts are warning of winter food shortages in Europe, and in the US we have seen inflation-driven purchases focused on commodities. This means that some agricultural, food-processing stocks and packaged food supplies have performed well.
While a young, volatile, speculative stock like Forafric may appear on screens identifying fast movers (as I’ve found), ADM is showing itself differently. This is a multinational food processing and raw material company founded in 1902.
ADM has a secret weapon for attracting investors: a long history of dividend hikes.
Its market cap is north of $45 billion and it is part of the S&P 500.
Although an old-fashioned company, it has been in growth mode lately, growing 4.88% over the past three months and 21.04% year-to-date.
That rally has been collapsing lately, along with the broader market. Archer-Daniels-Midland fell 11% last month. A potentially constructive chart pattern erupted after the stock rose to a session high of $92.26 on September 9 in above-average sales.
Shares have since fallen nearly 13%.
Fundamentally, the stock remains healthy, with earnings growth of 31% over three years and revenue growth of 15% over three years.
According to MarketBeat’s earnings trackerSince January 2021, the company has exceeded both top and bottom-line views in every quarter.
When ADM reported its second quarter in late July, the company was earning $2.15 per share, an annualized gain of 62%. Earnings growth accelerated in the past three quarters. Revenue was $27.3 billion, an increase of 19%.
For the full year, Wall Street expects earnings of $6.83 per share, up 32% from 2021.
In the call for profitCEO Juan Luciano reiterated the company’s expectation for operating income growth of between 15% and 20%.
As with many established large caps, ADM is a dividend hero. The company has been increasing shareholder payouts for an astounding 49 years, as you can see from MarketBeat’s stock dividend data.
The stock’s dividend yield is 1.99%, which isn’t great, but it is at least an incentive to hold stocks during a market decline or stock-specific sell-off. The long history of consistent dividend increases is also an attractive factor.
The stock closed at $80.57 Friday, finishing the week and quarter below the 200-day moving average.
Within the grain and commodity related food industry, ADM and tiny, young, speculative forafric are the best price performers.
Never heard of Forafric? That is understandable. It’s a very different kind of stock than ADM.
Forafric is a very small company, with a market cap of $300 million, that went public through a SPAC merger with Globis Acquisition Corp. That makes it the first African agricultural company and the first Morocco-based company to list on a US stock exchange.
It started trading under the AFRI ticker in June.
Forafric is engaged in the grinding of flour and semolina and the processing of grains into products such as pasta and couscous.
The company operates 12 industrial units and 2 logistics platforms. It exports its products to more than 45 countries around the world. The company has plans to expand in Morocco and across Africa, and one of its goals is to increase food security in its home continent.
It’s a laudable goal, and with African population growth at high double digits, it’s not hard to see the potential.
The stock is up 44.41% in the past three months, outperforming everything. Its one-month gain of 8.83% is perhaps even more impressive, as the broader market has basically gone into freefall recently.
Despite those gains, Forafric is currently a speculative stock as it is very small, has a short trading history and essentially no institutional ownership to speak of.
Ultimately, it may grow into a more stable stock to consider even if the market cap remains small, but it’s not there yet.