Tuesday, August 15, 2017

Recent Buy, August 2017

Rained Out Gremlin here.  It has been a strong summer.  My wife and I moved, I was a best man in a wedding, we had a mini family reunion, and on and on.  The new house is mostly set up, but it feels like there is always something to do.  As a new homeowner, yes we bought a house, it feels like there is no time to slow down.

Perhaps that is why, now more than ever, I view each dollar I make passively as getting some of my time back.  I figure for every $25 made passively, it is as if I have worked one extra hour.  Thus, at some point those extra bucks will become the main bucks, and I will be able to sleep in with no one stopping me.  Therefore in the back of my mind, I make a tally of how many extra hours that my money has worked for me.  So to keep the train rolling, I made another dividend growth investment.

Today, I added to a position by purchasing shares of Archer Daniel's Midland (ADM) in my taxable account.  I bought 30 shares, with a total cost of $1263.95 ($41.90 / share, plus commission).  The current yield is 3.10%.  The P/E ratio for ADM sits today at approximately 17.74, trailing.  This is better than the historical 5 year average for the stock with the average yield being 2.38% and the average P/E being just under 17.84.  ADM boasts a trailing payout ratio of approximately 53%.  ADM has 42 years of dividend growth and is a member of the Dividend Champions.  This purchase will add $38.40 to my 12-month forward income.

I already have ADM in my IRA, where I hold 70 shares that I purchased for a similar valuation back in September of 2016.  It was a monstrous amount of buys that I made with my transferred 401k funds from old job.  With this purchase I finally have 100 shares of a DGI stock in my portfolio.  If I want, options are literally now on the table.

So ADM, what do you do?  Well here is a description in their words:

"Archer Daniels Midland is a major processor of oilseeds, corn, wheat, and other agricultural commodities. Additionally, the firm owns an extensive network of logistical assets to store and transport crops around the globe. The company's end products include vegetable oil and meal, corn sweeteners, flour, feed ingredients, and ethanol."

I like that description.  It is simple and understandable.  The need for food products, oils, sweeteners, and similar foodstuffs will not likely go down.  It is possible the products could become cheaper, but the demand should always be present - pending any worldwide catastrophic events.  As someone who likes to cook a lot, I recognize that these items are so essential.  Even more necessary, but often misunderstood, is the food transport, distribution, and warehouse network.  I work near train tracks where daily ADM rail cars come by as part of larger trains.  This infrastructure takes a long time to build and is cost prohibitive.  This framework has an intrinsic value that is difficult to quantify, but is impossible to deny.

I will update my portfolio page at the end of the month.  Stronger 2017!

What do you think of ADM? 

- Gremlin
- Long ADM


  1. Hi Gremlin,

    I've had ADM on my watchlist for quite some time now but have not pulled the trigger in light of better deals out there. I think this is a solid buy and with its current price a nice addition to your portfolio. Keep it up!

    1. Mr. Robot,

      Thank you for the comment. There are definitely plenty of good deals, its all where you look and what you want. I want to beef up my consumer staples department, as it is the most recession proof of all sectors (at least that is historically true, but not always). Keep up your work too!

      - Gremlin