Archer-Daniels-Midland Company (ADM): One of the Undervalued Dividend Aristocrats to Buy Now

Yahoo

09-05-2025

We recently published a list of the . In this article, we are going to take a look at where Archer-Daniels-Midland Company (NYSE:ADM) stands against other undervalued dividend aristocrats.
Dividend-paying stocks are regaining popularity this year as investors look for ways to soften the blow of current market challenges. The S&P Dividend Aristocrats Index, which tracks the performance of companies with at least 25 consecutive years of dividend growth, has fallen by a little over 1.2% since the start of 2025, compared with a 4.1% decline of the broader market. Analysts point out that dividends not only help boost overall returns early on, but there's also clear evidence that companies with growing dividends tend to deliver stronger performance. These stocks often provide better returns with less risk, stay ahead of inflation, and hold up well whether interest rates are climbing or falling.
According to S&P Indices' 'Research Insights,' dividends have accounted for roughly a third of total returns since 1926. This is largely because, unlike stock prices that can fluctuate, dividends represent a guaranteed gain once paid out. Even in strong bull markets like the 1950s, 1980s, and 1990s, dividends played a meaningful role in enhancing investor returns. However, their true value becomes especially clear in weaker market cycles, when capital gains are modest or even negative, dividends have often made up more than half of the total return. In some cases, they've been the deciding factor in keeping returns positive. In essence, dividends tend to matter most when market performance falls short.
A report from Fenimore Asset Management reveals that between 1972 and 2016, companies that either raised or initiated dividends consistently outperformed those that did not. Historically, a dividend hike has often been viewed as a sign that management is confident in the company's future. This concept is even the basis of the 'Dividend Discount Model,' which values a company based on expected dividend growth.
On average, firms that grew or introduced dividends delivered annualized returns of 9.8%, outpacing businesses that didn't pay dividends. These companies typically enjoy rising sales and earnings, generating more cash than they need for reinvestment, allowing them to reward shareholders regularly. This pattern also reflects a strong commitment by management and the board to return value to investors.
In contrast, companies that cut or eliminate dividends often struggle financially. These underperformers posted annualized returns of -0.6% during the said period, and such reductions usually point to a weakening business, limited growth prospects, or a need to redirect cash toward internal needs rather than shareholder payouts.
The report also highlighted that one of the key advantages of a growing dividend is its ability to preserve purchasing power over time. As inflation gradually pushes up the cost of living, dividend income needs to grow just to keep up. Assuming a long-term inflation rate of 2%, dividends must increase by at least that much to avoid losing value in real terms.
While investors seeking income may be drawn to stocks with high current yields, it's just as important to consider how fast those dividends are growing. Focusing solely on yield without looking at growth can be short-sighted. In the long run, companies that steadily raise their dividends provide income that keeps pace with or even exceeds inflation, offering greater financial security.
A wheat field at sunset, showing the company's commitment to agricultural commodities.
For this list, we scanned the list of the S&P Dividend Aristocrats– the stocks that have raised their payouts for 25 years or more– and identified stocks with low forward P/E ratios. From there, we picked 11 dividend aristocrats with forward P/E ratios below 20, as of May 7, and ranked them accordingly.
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Forward P/E Ratio as of May 7: 11.21
Archer-Daniels-Midland Company (NYSE:ADM) is an American company that is involved in food processing and commodity trading. The company is carrying out a strategic initiative to enhance profitability and aims to generate $200–$300 million in cost savings over the coming years by streamlining operations and reducing its workforce. These efforts are intended to improve margins and reinforce financial stability in the face of ongoing economic challenges. In addition, ADM is leveraging technologies such as AI, data analytics, and SAP S/4HANA to boost supply chain efficiency, enhance demand forecasting, and sharpen pricing strategies—moves that are expected to support its competitive edge.
Archer-Daniels-Midland Company (NYSE:ADM) reported mixed earnings in the first quarter of 2025. The company posted revenue of $20.1 billion, which not only fell by 7.6% on a YoY basis but also missed analysts' estimates by $1.8 billion. However, the EPS of $0.70 beat consensus by $0.03. Total segment operating profit amounted to $747 million, reflecting a 38% decline compared to the same quarter last year. This figure excludes $49 million in specified items, which were mainly related to restructuring expenses.
Archer-Daniels-Midland Company (NYSE:ADM) ended the quarter with $864 million available in cash and cash equivalents. On May 7, the company declared a quarterly dividend of $0.51 per share, which fell in line with its previous dividend. Overall, it holds a 52-year streak of dividend growth, which makes ADM one of the best dividend aristocrat stocks to consider. The stock supports a dividend yield of 4.28%, as of May 7.
Overall, ADM ranks 2nd on our list of the best undervalued dividend aristocrats to buy now. While we acknowledge the potential of ADM as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued dividend stock that is more promising than ADM but that trades at 10 times its earnings and grows its earnings at double digit rates annually, check out our report about the .
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Disclosure: None. This article is originally published at .