Archer-Daniels-Midland Company's (NYSE:ADM) dividend will be increasing from last year's payment of the same period to $0.51 on 11th of March. This will take the annual payment to 4.4% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Archer-Daniels-Midland

Archer-Daniels-Midland's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite comfortably covered by Archer-Daniels-Midland's earnings, but it was a bit tighter on the cash flow front. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

Looking forward, earnings per share is forecast to rise by 35.8% over the next year. If the dividend continues on this path, the payout ratio could be 42% by next year, which we think can be pretty sustainable going forward.

Archer-Daniels-Midland Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the dividend has gone from $0.96 total annually to $2.04. This works out to be a compound annual growth rate (CAGR) of approximately 7.8% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Archer-Daniels-Midland Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Archer-Daniels-Midland has grown earnings per share at 9.0% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payments look okay by most measures, the lack of cash flow could definitely cause problems for them in the future. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Archer-Daniels-Midland that you should be aware of before investing. Is Archer-Daniels-Midland not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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