The agribusiness industry has long been an investor favorite on Wall Street, as these companies provide indirect exposure to some of the most popular commodities on the market. Agricultural products are best known for human consumption, although these commodities are widely used in a number of other applications, making the producers of these products highly appealing [for more commodity news and analysis subscribe to our free newsletter].
For those looking to add exposure to this popular industry, we highlight one of the biggest names in agribusiness: Monsanto Company (MON).
Agribusiness in Focus
The St. Louis, Missouri-based Monsanto Company (MON) was founded in 2000, and has since grown to be the world’s leading producer of the herbicide glyphosate and the second biggest producer of genetically engineered seeds. The company has two primary business segments: Seeds & Genomics and Agricultural Productivity.
The Seeds and Genomics segment produces row crop seeds, including corn, soybean, cotton, and canola seeds, as well as vegetable seeds consisting of tomato, pepper, melon, cucumber, pumpkin, squash, beans, broccoli, onions, and lettuce seeds. The Agricultural Productivity segment manufactures and sells herbicides for agricultural, industrial, ornamental, turf, and residential lawn and garden applications.
One of the most unique and promising services Monsanto provides, however, has been its “precision farming” technology, which involves gathering key data from farmers, such as historic crop yields, soil conditions, and seed performance. Once the data is analyzed by the company, it sends a computer file with recommendations back to the farmer, who can then upload it into a planter; the equipment then plants based on the recommendations. The technology also advises farmers on how to manage and increase crop yields, based on weather and other factors monitored by the company [see The Next Big Industry: Farming Technology].
- Market Cap: $59.4 billion
- Volume: 3.4 million
- P/E Ratio: 21.99
Though the company is relatively young, Monsanto is one of the largest agribusiness firms in the industry. Its market capitalization comes in just under $60 billion, with shares of the company trading roughly 3.4 million times a day on average. MON’s P/E ratio is roughly in line with other companies in the industry; the stock’s forward P/E (1 year) is 16.50.
- Annual Payout: $1.96
- Dividend Yield: 1.73%
- Dividend Growth: 4 Years
Monsanto began paying a dividend in 1993, but it has only consecutively increased payouts over the last four years. In 2013, MON’s annual dividend growth was 22%. Currently, the stock pays dividends quarterly at an annualized $1.96 per share. Based on its current price, the stock yields approximately 1.73% [see 50 Ways To Invest In Agriculture].
Year-to-date, Monsanto Company shares have shed just over 3.0%. Its high this year occurred on June 25 at $128.79 per share. MON’s 52-week low occurred on November 5, 2013, at $102.88.
The Bottom Line
While researching the fundamentals of Monsanto Company, investors should also keep in mind that there are a number of factors that could affect the stock’s performance, including operational costs, the price of grains, as well as continuing concerns over the company’s use of chemicals and the public’s negative view of GMOs.
Disclosure: No positions at time of writing.