Dividend Aristocrats Part 22 Of 52: Archer-Daniels-Midland

Archer-Daniels-Midland (ADM) is by far the largest farm products corporation in the world. The company currently has a market cap of over $24 billion – larger than the next 4 largest farm products companies combined.

The market caps of the next 4 largest farm products companies is shown below:

I last analyzed ADM on December 1st, 2014.The company’s stock has declined 22.9% since that time.

Source: Google Finance

The company’s stock price decline over the last 11 months is a result of declining commodity prices and weaker-than-expected earnings.

Understanding ADM’s Operations

ADM operates in 4 segments:

Through the first 9 months of ADM’s fiscal 2015, the Oilseeds Processing segment has generated 49% of the company’s operating income. Agricultural Services and Corn Processing have generated 21% and 19%, respectively, of the company’s operating income. The WILD Flavors & Specialty Ingredients segment was responsible for 10% of operating income. A brief description of each segment is below:

Oilseeds Processing:  The Oilseed Processing segment originates, crushes, processes, and merchandises oilseeds which include soybeans, cottonseed, sunflower seeds, canola, rapeseed, and flaxseed into vegetable oil and protein meal.

Corn Processing: The Corn Processing segment converts corn into sweeteners, starches, and bio products (ethanol).

Agricultural Services: Archer-Daniels-Midland’s Agricultural Services segment buys, stores, cleans, and transports agricultural commodities.

WILD Flavors & Specialty Ingredients: This segment was created on January 1st of 2015 to house the company’s flavorings and specialty ingredient operations which include specialty proteins, emulsifiers, and various vitamins, among other items. The WILD Flavors acquisition was completed in October of 2014.