- No dividend increase announced in 2012: Even though ADM can maintain its long dividend growth streak by announcing an increase during 2013, I was disappointed by this (lack of) news. Every other company in my portfolio increased its dividend in 2012.
- Earnings volatility: It was not until last year's drought that I recognized just how volatile the company's earnings could be and how susceptible they were to external factors. I want the companies in my portfolio to have better earnings stability.
- Occasional negative free cash flows: I did not notice until after I bought ADM that its free cash flow is also volatile, being negative in four of the last ten years. I want my companies to have consistently positive free cash flows. It was a failure of due diligence that I did not examine this point prior to my investment in ADM.
- Questionable acquisition attempt: Despite the recent weakness in its financial position, ADM is attempting to acquire Australian-based GrainCorp for nearly $3 billion. Even though such an acquisition might ultimately benefit ADM, I question whether it is a prudent action at this time.
- Better investment opportunities: I think I can put the capital I had invested in ADM toward a better opportunity, perhaps one with a higher dividend yield than the 2.4% I was getting from ADM.
Friday, January 4, 2013
Stock Sold: ADM
Today I sold all my shares of Archer Daniels Midland (ADM). In a previous post I discussed my conditions for selling a stock and back in November I expressed some concerns about ADM. Here are the reasons why I sold:
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Good reasons for a sale. ADM might very well be a longterm winner, but there are a lot of question marks at the moment. Especially the dividend streak. I do hope ADM increases the dividend this year, it would be sad to lose a dividend champion.
ReplyDeleteIt's quite impressive to go over a year with no sales in a portfolio of 25+ positions. Unfortunately I did 4 sales in 2012, but I think I'm better off now.
Compounding Income: Thanks for your comment. I agree that ADM could turn out to be a long-term winner, but I don't like the degree of uncertainty associated with it.
DeleteI find that selling stocks is much more difficult than buying them. However, if a sale can improve a portfolio, then it is the right thing to do.
I've been thinking about selling out of ADM as well. Of course I'm sitting on a total return of 13%+ which is the only reason I'm still holding. I kind of want to see what the DG will be and then probably make a decision then. I expect they'll increase it, but if it's just a token increase of a $0.01 they'll probably be gone.
ReplyDeletePassive Income Pursuit: Thanks for your comment. I thought about waiting for their next earnings call and dividend announcement, but I decided it was better to take advantage of the recent price uptick to exit my position. If they do announce a dividend increase, I would be surprised if it were more than a mid-single-digit percent boost.
DeleteI kind of want to see what the DG will be and then probably make a decision then.
ReplyDeleteNDT Machine
MCD: Thanks for your comment. I thought about waiting until the next dividend announcement, but I ultimately decided it was better to act now.
DeleteArcher daniels midland is a very good value stock the market cap on the stock is just 23 billion dollars. But the company does 90 billion in sales annually.
ReplyDeleteQS: The valuation is good, but as mentioned above, I don't like the earnings volatility and occasional negative free cash flows. The high annual sales figure is nice, but bear in mind that very little of it is realized as profit because of thin margins (only 1-2%).
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