Despite the many challenges that farmers face, increasing population is likely to support long-term growth of the agricultural industry; the world’s population is estimated to reach 9.7 billion by 2050, up from 7.3 billion in 2016. Companies providing innovative farming products that incorporate new technologies are well positioned to benefit, as the need for increased output rises.
These are some of the top farming stocks of 2016.
Monsanto Co. (NYSE: MON) provides farmers with agricultural products, such as seeds, biotechnology trait products, herbicides and tools. German life-science company, Bayer AG (OTC: BAYRY) offered to buy Monsanto in June 2016, for an effective price of $122 per share; this was rejected, which may result in Bayer raising their offer to negotiate a deal that satisfies both parties. Monsanto has a trailing 12-month (TTM) operating margin of 15.7%, which is above the agricultural inputs industry average of 12.6%. The stock had appreciated 10.35% year-to-date (YTD) as of Aug. 23, 2016, and was trading toward the top if its 52-week trading range between $81.22 and $114.26. It offers a dividend yield of 2.02% and has a $46.9 billion market capitalization.
Deere & Co. (NYSE: DE), founded in 1837, manufactures and distributes agricultural, construction, forestry and consumer products. The company, based in Moline, Illinois, posted strong 2016 third-quarter earnings per share (EPS) of $1.55, easily exceeding analyst’s expectations of 94 cents a share. It additionally raised its outlook for full-year 2016 net income from $1.2 billion to $1.35 billion. Deere is optimistic about growth from Brazil’s agriculture market in the fourth quarter of 2016. The company is cheaper than its peers, with a price-earnings (P/E) ratio of 17.6, substantially below the farm and construction industry average of 82.1. The stock has kept investors satisfied with a YTD return of 17.07% and 2.72% dividend yield, as of Aug. 23, 2016. Deere has a market cap of $27.7 billion.
Archer Daniels Midland
Archer-Daniels-Midland Co. (NYSE: ADM) has a market cap of $25.7 billion. The company stores, transports and processes agricultural products. It has extensive operations that span six continents. Key infrastructure includes 460 crop procurement locations and 300 ingredient-manufacturing centers. Archer Daniels Midland’s price-to-book (P/B) ratio of 1.4 is below the farm products industry average of 1.9. It uses minimal shareholder equity to finance its assets, with a low debt-to-equity (D/E) ratio of 0.3. The stock performed solidly with a 22.74% YTD return, as of Aug. 23, 2016, eclipsing the return of the Standard and Poor’s (S&P) 500 Index by roughly 16%. Investors receive a 2.67% dividend yield.
Agrium Inc. (NYSE: AGU) produces and distributes agricultural products and services for retail and wholesale customers, such as crop nutrient and protection products, seed and various other farming-related products. The company has a market cap of $12.7 billion. Its wide distribution network throughout the Americas and Australia position the company to benefit from industry growth and consolidation. Agrium offers an enticing dividend yield of 3.8%; its payout ratio of 55.4% provides ample room for further dividend increases. The stock had a YTD return of roughly 5% as of Aug. 23, 2016, and is attractively priced, with a forward P/E ratio of 11.8.
Bunge Ltd. (NYSE: BG) is an agribusiness and food company that buys, sells, stores, transports and processes soft commodities that include wheat, corn and oilseed. The company also sells fertilizer and produces sugar. Bunge has beaten Wall Street’s earnings expectations in both the first and second quarters of 2016, and has impressive three-year average revenue growth of 131.2%, roughly four times above the farm products industry average of 29.7%. The stock returned -4.38% YTD as of Aug. 23, 2016, but put in a stronger performance over the last month, returning 3.75%. Bunge offers investors a 2.43% dividend yield and has a market cap of $8.9 billion.