Agriculture stock is a low-risk investment that keeps pace with inflation and increases in value over the long-term.
Agriculture is one of the main industries in the US with 40% of the land dedicated to farm products, dairy farming, and livestock. Not only is the US a large producer of agricultural products, but it is one of the leading exporters as well.
The agriculture segment contributes around $2.7 trillion to the US economy with a projected 8% growth year-on-year. Analysts expect the sector to reach around $451 billion by the end of the year 2021.
Let’s take a look at a few agriculture stocks that you can possibly add to your portfolio.
Archer-Daniels-Midland (NYSE: ADM), a global leader in human and animal nutrition, has an incredibly long dividend growth streak and possesses a market-beating yield. In the fourth-quarter results, revenue grew by 10.1% to $18 billion, which was above Wall Street analysts’ estimates.
The Chicago-based food processing and commodities trading company is separated into 3 main businesses like oilseeds, carbohydrate solutions, and nutrition, which showed an increased profit for the fiscal year 2020.
The company plans to lead the bioenergy domain and position itself in both food and fuel segments. ADM plans to expand its root presence in oil palm in Indonesia, sugar in Brazil, and other carbohydrates around the world to produce biofuels.
Archer-Daniels-Midland has an excellent history of returning capital to shareholders through its dividend. The current yield of 3%, which the company is giving out is better than the total agriculture industry.
Bunge (NYSE: BG) is an agribusiness and food company that has a market capitalization of $6.4 billion. The company had revenue of $9.3 billion in the fourth quarter of 2020. Since March 2020, the stock has risen almost 135%, which is the highest in the agriculture industry.
The St. Louis-based grain trading and fertilizer company recently agreed to sell a refinery in Rotterdam and a rice mill in California for €258 million in cash to support the long-term strategy in value-added oils and oilseeds-based ingredients.
Trading margins have returned for Bunge as top commodities buyer China loads up on the US crops. The Asian nation has already bought record amounts of American corn, while soybean purchases are running at a fast pace.
Bunge has an acceptable payout ratio, although its dividend is not well covered by cash flow. EPS growth has been slow, but it has successfully maintained a stable yield of 3.1%.
Nutrien (NYSE: NTR), the third-largest producer of nitrogen fertilizer in the world, is already a huge hit amongst the investors since its creation through the $36 billion mega-merger of Agrium and PotashCorp of Saskatchewan region recently in 2018.
The Canada-based potash producing giant had net earnings of $316 million with a whopping revenue of $2.6 billion in the fourth quarter of 2020. The company increased its quarterly dividend to $0.46 per share, equating to an annualized dividend of $1.84 per share.
Nutrien announced the launch of a comprehensive carbon program for improved sustainability and to boost yields, as well as to provide the opportunity to improve carbon performance at the farm level through carbon credits. The coming year is likely to see a great demand for potash and nitrogen fertilizer on a global scale due to its cost-effectiveness.
The company predicts earnings up to $4.5 billion with revenue growing to $22 billion. Nutrien has a yield of 3.7% which is one of the highest in the industry.