The ‘farm products’ industry has caught my eye in recent weeks as I have been slowly adding to my Archer-Daniels-Midland Company (ADM) holding as better prices, value and yield for this dividend stalwart began to emerge. While I’m not a huge fan of commodity based businesses, (I see ADM more as a consumer staple play with commodity ties, rather than a pure play commodity based business), I began to wonder what other dividend players can be found on the farm.
When I first started this blog I wrote a post titled, “Moo… Agribusiness Dividend Stocks,” where I highlighted various agribusiness plays including,The Mosaic Company (MOS), Potash Corp. of Saskatchewan, Inc. (POT) and Agrium Inc. (AGU) as well as Monsanto Company (MON), CF Industries Holdings, Inc. (CF) and even the ETF Market Vectors Agribusiness ETF (MOO). A few of these names can be found among the portfolios of our fellow dividend growth investors and while some of those seed and fertilizer businesses clearly offer some compelling yield and growth potential I found a few other lesser known dividend payers from the farm. With that being said, let’s take an overview of some of those dividend stocks.
First up, Bunge Limited (BG). Similar in business to ADM, BG produces, processes and stores oilseeds and grains, including soybeans, rapeseed, canola, sunflower seeds, wheat, and corn to animal feed manufacturers, livestock producers, wheat and corn millers, other oilseed processors, third-party edible oil processing companies, and biodiesel industries. Founded in 1818 and headquartered in White Plains, New York, BG is a company with a very long history of operations. Currently yielding a decent 2.30% with a relatively low payout ratio of 29.5% this stock sports a safe dividend with room to grow based on a current EPS of 5.15. BG also has a pretty impressive ten year annualized dividend growth rate of 10.31%. From a valuation perspective, BG has a current PE of 20.4 well below its five year average of 27.0. Like ADM, could BG be looking a lot more attractive than in recent months because of commodity price pressure, a strong U.S. dollar and general weakness from the Asian and European economies? Forward PE for BG looks a lot more enticing at 9.9. Of course, a four star rating from Morningstar doesn’t hurt either.