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Analyzing Archer Daniels Midland’s 339th Dividend Payment

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Balanced capital allocation framework

In 1H16, in light of its balanced capital allocation framework, Archer Daniels Midland (ADM) had a balanced use of cash between capital expenditure, mergers and acquisitions, and capital return to shareholders.

For 1H16, capital expenditures were lowered to $396 million—compared to $540 million the previous year. Expenses related to mergers and acquisitions were $120 million in 1H16—Harvest Innovations in the WILD Flavors and Specialty Ingredients segment, Medsofts, and Agricultural services in Morocco in the Corn Processing segment.

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339th dividend payment

One day after its 2Q16 results, Archer Daniels Midland declared a cash dividend of $0.30 per share on the company’s common stock on August 3. This will be paid on September 7, 2016, to shareholders of record on August 17, 2016. This dividend marked Archer Daniels Midland’s 339th consecutive quarterly payment.

Currently, Archer Daniels Midland has a dividend yield of 2.7% as of August 3. Management has been increasing the dividend at a compound annual growth rate of 14.4% over the past five years.

The following are peers’ dividend yields as of August 3:

  • Ingredion (INGR) has a dividend yield of 1.3%.
  • Bunge (BG) has a dividend yield of 2.6%.

The Consumer Staples Select Sector SPDR Fund (XLP) and the SPDR S&P Global Natural Resources ETF (GNR) invest 1.4% and 1.9% of their portfolios in Archer Daniels Midland.

Returning capital to shareholders

In 1H16, the total capital returned to shareholders was $800 million. The company spent about $487 million to repurchase ~13.5 million shares. Management mentioned that the company’s objective is consistent to repurchase $1 billion–$1.5 billion in shares in 2016. This is subject to strategic merger and acquisition opportunities.

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