Shares of Archer Daniels Midland Company (ADM) reached a new 52-week high of $43.96 on Friday, Dec 27 and eventually closed trade at $43.76. The average volume of shares traded over the last 3 months was over 4,604K. Notably, this global food-processing and commodities-trading company amassed a year-to-date return of approximately 56%.
Moreover, Archer Daniels currently trades at a forward P/E of 19.6x, a 15.3% premium to the industry average of 17.0x. Additionally, the company’s long-term estimated earnings per share (EPS) growth rate of 8.7% is substantially higher than the industry average of 6.8%.
We believe that the stock’s strong price appreciation was primarily driven by Archer Daniels’ latest commitment of returning $1.4 billion to shareholders in the form of dividend payouts and share repurchases in 2014.
Archer Daniels recently declared an increase of its quarterly dividend by 26% to 24 cents per share from its earlier payout of 19 cents. Apart from this, the company’s board of directors has decided to enhance shareholders’ wealth through share repurchases. This Zacks Rank #2 (Buy) company intends to buy back 18 million of its common shares by the end of 2014, which are worth nearly $725 million at the current market price.
We believe that dividend payouts not only enhance shareholders’ value but stimulate a momentum in the company’s share price as well. Moreover, such a measure enables companies to bolster investors’ confidence, persuading them to either buy or hold the scrip instead of selling it. Looking ahead, Archer Daniels remains confident of its growth potential, raising hopes for further enhancement of shareholders’ returns through dividend payments.
Furthermore, we expect Archer Daniels’ consistent focus on enhancing its processing capabilities and the expansion of its global footprint through strategic acquisitions and joint ventures to bode well for future growth. The company intends to invest around $1.4 billion in capital projects in 2014, out of which most will be outside the U.S. in high growth markets.
Apart from Archer Daniels, companies such as The Walt Disney Company (DIS), V. F. Corp. (VFC) and Newell Rubbermaid Inc. (NWL) achieved new 52-week highs of $74.78, $62.48 and $32.38, respectively, on Dec 27, 2013.