What's Happening
Agricultural products maker Archer-Daniels-Midland ( ADM ) has an impressive 41-year streak of dividend increases, which it will likely extend with its next dividend announcement. Look for the company to announce its next dividend this week. The stock has gained 32.9% over the last year.
Technical Analysis
ADM was recently trading at $44.85, down $3.03 from its 12-month high and $13.55 above its 12-month low. Overall technical indicators for ADM are bullish with a strong upward trend. The stock has recent support above $43.15, and recent resistance below $45.50. Of the 11 analysts who cover the stock, three rate it a "strong buy", seven rate it a "hold", and one rates it a "strong sell". The stock receives S&P Capital IQ's 3 STARS "Hold" ranking.
Analyst's Thoughts
With a 41-year streak of dividend increases, ADM is a true dividend aristocrat, and given that the stock has a fairly low 53.3% payout ratio, it can easily afford to build on its streak of increases. The company has historically announced its dividend increases during the first week of February, and there is no reason to expect it will deviate from that timeline this year. The stock is currently yielding 2.7%, so the company will not likely announce a huge increase this year. Last year the company boosted its dividend by 7.1%, and in the previous year it increased its quarterly distribution by 16.6%. I would expect this year's increase to be more in-line with last year's increase, and the company boosting its payout from $0.30 to around $0.32, for a 6.7% increase. Expect the news this week, with the stock trading ex-dividend mid-February.
Stock Only Trade
If you're looking to establish a long stock position in ADM, consider buying the stock under $44.75. Sell if it falls below $40.25 or take profits if it gets to $51.50.Bullish Trade
If you want a bullish hedged trade on the stock, consider a March 35/40 bull-put credit spread for a 25-cent credit. That's a potential 5.3% return (39.2% annualized*) and the stock would have to fall 10.3% to cause a problem.
Bearish Trade
If you want to take a bearish stance on the stock at this time, consider a June 50/55 bear-call credit spread for a $0.40 credit. That's a potential 8.7% return (22.7% annualized*) and the stock would have to rise 12.4% to cause a problem.
Covered Call Trade
If you like the stock, but wish to lower your cost basis on a new position, you may want to consider a March $46.00 covered call. Buy ADM shares (typically 100 shares, scale as appropriate), while selling the March $46.00 call for a debit of $44.15 per share. The trade has a target assigned return of 4.2%, and a target annualized return of 31.9% (for comparison purposes only).The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Originally published on InvestorsObserver.com
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
