We recently published a list of 8 Best Beverage Dividend Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where Archer-Daniels-Midland Company (NYSE:ADM) stands against best beverage stocks that pay dividends.
Retail sales rebounded significantly in October as the economy remained stable and consumers overcame worries about a port strike and other challenges that had dampened sales in September, according to the CNBC/NRF Retail Monitor. NRF President and CEO Matthew Shay noted that consumer spending picked up again in October, supported by job growth and increased wages throughout the year. He observed that inflation remained largely confined to services, with prices for some retail goods even declining. Shay indicated that October’s sales performance had laid a solid foundation for the holiday shopping season to begin on a positive note. When we examine specific sectors, we see that grocery and beverage stores experienced a 0.87% increase on a seasonally adjusted month-over-month basis and a 3.76% rise year-over-year without seasonal adjustments.
The food and beverage industry faced significant challenges during the pandemic. While in-home consumption surged, out-of-home dining virtually ceased, leading to a substantial decline in business and severely impacting the sector. Since then, the industry has undergone numerous transformations and is now in a recovery phase. According to a Market Research report, the global food and beverages market is projected to grow at a compound annual growth rate (CAGR) of 5.9% between 2022 and 2027. The market’s growth is being driven by shifting consumer habits, out-of-town retail parks, and retail stores.
READ ALSO: 7 Best Beverage Stocks that Pay Dividends
Coffee remains the most popular beverage among Americans. In 2023, spending on out-of-home cold coffee, such as iced coffee, cold brew, and frozen coffee drinks, reached $17.7 billion—more than double the $8.5 billion spent in 2016, according to the food service research firm Technomic. Additionally, the National Coffee Association (NCA) reported that coffee consumption outside the home has returned to pre-pandemic levels as people resume visiting coffee shops and workplaces. Over a third of consumers who drank coffee on a given day did so away from home, marking the highest rate since January 2020, as highlighted in the NCA’s National Coffee Data Trends report.
Consumer behavior plays a critical role in shaping any industry, and the beverage sector is no exception. This industry is adapting to evolving preferences, with more Americans seeking alternatives to alcohol. Beverage companies emphasizing the health benefits of their products are striving to tap into this trend. According to data insights firm NCSolutions, over 40% of Americans aim to reduce their alcohol consumption in 2024, an increase from 34% the previous year. Among Generation Z, this figure rises to 61%, compared to 40% in 2023 who expressed similar intentions.
Technology stocks have been the standout performers this year, with gains of nearly 29%. While food and beverage stocks haven’t seen exceptional growth, the Food & Beverage index, which represents companies across various sub-industries in the sector, has still delivered a modest year-to-date return of 7.5%. Over the past 12 months, the index has risen by approximately 14%.
A wheat field at sunset, showing the company’s commitment to agricultural commodities.
Our Methodology
To select the best beverage stocks, we scanned Insider Monkey’s database of 900 hedge funds as of Q3 2024 and picked companies that are primarily involved in the production and distribution of a wide variety of liquid refreshments, including soft drinks, alcoholic beverages, coffee, tea, bottled water, energy drinks, fruit juices, sports and nutritional drinks, and dairy-based beverages. From that list, we selected 10 companies that pay dividends to shareholders and ranked them in ascending order of the number of hedge funds having stakes in them as of Q3 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
Archer-Daniels-Midland Company (NYSE:ADM)
Number of Hedge Fund Holders: 34
Archer-Daniels-Midland Company (NYSE:ADM) is an American food company that specializes in agricultural commodities and food ingredients that are used for alcoholic and non-alcoholic beverages. The stock has dropped by nearly 27% since the beginning of 2024, as various market factors have continued to impact the business throughout the year. Furthermore, its third-quarter earnings fell short of expectations.
Archer-Daniels-Midland Company (NYSE:ADM) reported revenue of $20 billion in the third quarter of 2024, down by over 8% from the same period last year. The revenue also beat market expectations by $1.57 billion. However, the company anticipates softer market conditions in the coming year but is implementing measures to enhance performance and create value. It also intensifies efforts on productivity and operational excellence while adhering to a disciplined capital allocation strategy.
Though Archer-Daniels-Midland Company (NYSE:ADM) fell short of investor expectations with its recent quarterly earnings, its dividend history remains highly reliable, making it appealing to income-focused investors. Year-to-date, the company reported an operating cash flow of over $2.4 billion, compared with $1.9 billion in the prior-year period. On November 8, it declared a quarterly dividend of $0.50 per share, which was in line with its previous dividend. Overall, the company has been growing its dividends for 51 consecutive years, which makes ADM one of the best beverage stocks on our list. The stock’s dividend yield on November 24 came in at 3.76%.
At the end of Q3 2024, 34 hedge funds tracked by Insider Monkey held stakes in Archer-Daniels-Midland Company (NYSE:ADM), compared with 35 in the previous quarter. These stakes have a collective value of over $556.5 million. Among these hedge funds, AQR Capital Management owned the largest stake in the company.
Overall, ADM ranks 8th on our list of best beverage dividend stocks to buy according to hedge funds. While we acknowledge the potential for ADM to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ADM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.