Top 3 Dividend Stocks in a Recession-Defensive Sector
The agriculture sector should be appeal to investors who don't want to see geopolitical or macroeconomic volatility hit their dividends.
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The agricultural sector is a compelling place to invest right now for several reasons. First, it is a very defensive sector given that our need to eat does not change with macroeconomic or geopolitical conditions or technological disruptions.
From the beginning of human history, mankind has always needed to eat, and this demand has only increased with the growth of the human population. As the global population continues to grow, alongside a limited amount of land for food production, agriculture companies stand to capitalize on these trends.
In this article, we will discuss three agricultural dividend stocks with long-term growth potential.
1. Archer Daniels Midland Company (ADM)
ADM ADM holds the distinction as being the largest publicly-traded farmland product company in the United States. It has three major business lines: cereal grains, oilseeds and agricultural storage and transportation.
It generally purchases its crops from production farms and then provides the transportation, storage and processing services before turning around and selling them to customers in the food, feed and energy businesses.
Archer-Daniels-Midland reported its fourth-quarter fiscal year (FY) 2024 results on February 4, 2025. The company reported full-year earnings per share (EPS) of $3.65 and adjusted EPS of $4.74, both lower than the previous year. Net earnings totaled $1.8 billion, while adjusted net earnings reached $2.3 billion.
The company generated $2.8 billion in cash flow from operations. In response to market challenges, ADM announced cost-saving initiatives targeting $500 million and $750 million and increased its quarterly dividend by 2%.
It benefits from enormous economies of scale thanks to its 800 facilities, 59 innovation centers, 317 food and feed processing locations, 453 crop procurement locations, over 41,000 employees, and end markets in over 200 countries. It also benefits from a very strong balance sheet as evidenced by its A credit rating.
Another competitive advantage for ADM is its specialty sweeteners and starches business and its specialty ingredients products business. These are proprietary products that the company develops by leveraging its superior economies of scale to invest in research and development. As a result, it can charge higher prices for these products and also generally enjoys stickier customer demand.
Its diversified and competitively advantaged business model, strong balance sheet, and prudent long-term focus has enabled it to pay out dividends for 90 consecutive years. The company aspires to grow earnings per share at a high single digit annualized rate through 2025 while deploying 30% 40% of its cash flows into capital expenditures at a 10% return on invested capital and another 30% to 40% of cash flows into dividends.
When you combine the high single-digit expected growth rate and the 4.3% dividend yield, ADM is a strong candidate to generate double-digit annualized returns over the long-term.
3. Ingredion Inc. (INGR)
Ingredion Inc INGR is a multinational ingredient solutions company headquartered in Westchester, Illinois. Founded in 1906, INGR was incorporated as a Delaware corporation in 1997, operates in over 44 countries and employs more than 11,000 people. The company is principally engaged in producing and selling starches and sweeteners for various industries.
Ingredion operates in three business segments: Texture & Healthful Solutions, Food & Industrial Ingredients-LATAM and Food & Industrial Ingredients-U.S./Canada.
Ingredion released its Q4 2024 results on February 4, 2025, reporting a 6% year-over-year decline in quarterly sales to $1.8 billion. The decrease was primarily driven by lower pricing due to the pass-through of reduced corn costs and the impact of the South Korea business divestiture.
Texture & Healthful Solutions continued to be the strongest performer, posting a 24% increase in operating income, fueled by strong demand and improved volumes. Adjusted operating income for the quarter rose 22% to $248 million, benefiting from lower input costs. Adjusted EPS grew 34% year over year to $2.63, compared to $1.97 in Q4 2023.
Full-year adjusted EPS rose 13% to $10.65, compared to $9.42 in 2023. Cash from operations reached $1.44 billion, helped by a $400 million improvement in working capital as corn costs declined.
The company has forecasted its forward-looking guidance with an adjusted EPS between $10.75 and $11.50, which includes the gain on the sale of South Korean operations. Volume is likely to increase in 2025 with solid demand and breakthrough product innovation in the specialities segment. Guidance implies full-year growth of at least 10%.
The company tries to gain a competitive advantage by investing heavily in R&D with a team of over 500 scientists who work on plant science, food formulations and the development of non-food applications such as starch-based biopolymers.
INGR has increased its dividend for 14 consecutive years.
3. Deere & Company (DE)
Deere & Company DE is the largest manufacturer of farm equipment in the world. The company also makes equipment used in construction, forestry and turf care, produces engines and provides financial solutions to its customers.
Deere is the largest player in the agricultural machinery manufacturing industry. This means that it is hard for new competitors to steal market share from Deere, especially since it is difficult to replicate the company’s global sales and dealership network.
In mid-February, Deere reported financial results for the first quarter of fiscal 2025. Sales decreased -30% over the prior year’s quarter due to lower demand in all the segments amid tough comparisons. Earnings-per-share decreased by 49%, from $6.23 to $3.19, and missed the analysts’ consensus by $0.06.
Management continued to characterize current business conditions as challenging. Deere reiterated its guidance for earnings of $5.0 billion to $5.5 billion this year. Accordingly, we forecast earnings per share of about $20.00.
There are many factors that could fuel growth for Deere. For instance, acquisitions such as the takeover of Wirtgen Group. In addition, long-term global economic growth and share buybacks could add to the growth thesis. Deere has also been growing its presence in the higher-growth construction machinery market, both organically as well as via acquisitions.
Deere’s dividend payout ratio has never been especially high. With a 2025 dividend payout ratio below 40%, we believe that the dividend is quite safe.
At the time of publication, Ciura had no positions in any securities mentioned.