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:

• 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.

I sold 60 shares of ADM at the price of $29.06 per share. After holding the stock for nearly one year, I ended up with a total return of $35.76 (2.1%), which is the net effect of $42.00 in dividends and a $6.24 capital loss. The impact of this sale on my dividend income going forward will be minimal. It is notable that I went the entire year in 2012 without selling a stock, then I start off 2013 with a sale. However, I currently have no plans to sell any other stocks in my portfolio.