It has been awhile since I have posted a Recent Buy article. Despite not making any big purchases in awhile I have still been watching the market. While I have been quietly observing I have been waiting for a good opportunity to come along and I think that I finally found that opportunity. Earlier this week I started a new position in Archer-Daniels-Midland Company (ADM) and I also added to my position in General Mills (GIS). The best thing about making these buys is because I let my rewards truly reward me. The majority of these purchases were made with money that I earned with Cash Back Rewards! To start with I will look at General Mills.
The share price has been way below my cost basis. So I decided that now was a good time to add 5 shares to my position in General Mills. At the time I added these shares, I was able to get them at a price of $53.82. This brings my total position up to 17.1 shares. Adding these 5 shares will add $2.45 to my quarterly dividend, bringing the total up to $8.38. This will also add a total of $9.80 to my projected annual dividend income for a total of $33.52.
A lot of my thinking on General Mills hasn’t changed since the last time I bought shares of General Mills. I still think that it is a good company that is just working on navigating a transition period. With the size of the company and with it dominating several aisles in every grocery store, I think that it will be just a matter of time before the company is able to make a big turn around.
So for now I will continue to hold my position. If the share price remains below my cost basis, I will continue to add to this position.
The the other addition that I made was in Archer-Daniels-Midland. I bought 12 shares of the company at an average price of $41.50. This addition will pay me a quarterly dividend of $3.84. It will also add $15.36 to my projected annual dividend income. The company has a 41 year history of growing its dividend. Currently, based on EPS the companies payout ratio is only 49.4%. This is a good range for the payout ratio in my opinion. Despite the deflated commodity prices in the market, the company should be able to continue to increase its dividend in the future.
One thing to keep in mind when you look at this company is the fact that it is a highly cyclical company. This can clearly be seen by the fact that its share price is hurting because of deflated commodity prices. A lot of people are not very favorable on this company right now because of that. Another reason is that the general consumer trend seems to be moving away from high fructose corn syrup. Even with the trend moving away from high fructose corn syrup, I think that the corn business will still be a good business for them because of its many uses. While their corn processing may be down they are turning a lot more profit out of their oilseed processing business.
I think the company is moving in the right direction with their acquisition of speciality spice companies. These additions will allow them to diversify their portfolio so that more revenue is generated outside of their corn business. Natural flavors and ingredients is a fast growing market that ADM is looking to capitalize on in the future. Their recent acquisitions support this idea.
With commodity prices depressed and their diversifying their portfolio I thought that now would be a good time to start a position. If the share price remains depressed I will continue to add to this position as I think it is a good company with the ability to continue pay growing dividends for years.
I am very intrigued to hear what your thoughts are on my recent purchases!
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As always I look forward to reading all of your comments and questions, until then….. happy investing!