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Agricultural commodity processor
Archer-Daniels Midland (
ADM) has enjoyed some stellar stock performance of its own this year; dhares of the $24 billion stock have rallied more than 24% since the first trading session in January. The firm currently pays out a 19-cent dividend each quarter.
ADM takes raw soft commodities such as oilseed and wheat as inputs and spits out processed products such as vegetable oil to flour on the other side. That means that ADM is about as tied-in to global agricultural commodity prices as a company can get. One of ADM's biggest advantages is its network. The firm has more than 300 locations spread across the world, providing reach that enables ADM to take advantage of arbitrage opportunities and minimize its input costs. Scale means a great deal for ADM.
Because of that scale, for instance, ADM can assert some pricing power over its suppliers, even though many of the goods it deals in are commoditized. Make no mistake -- ADM's status as the middleman between farmers and food companies guarantees that profit margins are extremely thin, but the firm makes up for that limitation in volume. Extremely high barriers to entry mean that the parties on either side of the transaction can't easily (or cheaply) usurp Archer-Daniels Midland either, a big advantage.
ADM's dividend works out to a 2.22% dividend yield at current price levels. Investors should look for a bump to that payout in the next quarter.
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-- Written by Jonas Elmerraji in Baltimore.