Potash – Canada’s Best Dividend Stock?

An enviable record of dividend hikes is being strung together by this market leading company.

| More on:
The Motley Fool

Potash (TSX:POT,NYSE:POT) announced yesterday that it was hiking its dividend, again.  The quarterly payout was increased to $0.35 from $0.28, a 25% raise.  At yesterday’s closing price of $44.12, this new payout results in a yield of 3.2%.  This is the fifth (fifth!) time Potash has bumped its dividend since 2011 and has resulted in a cumulative increase of 950% over this period.  Wow!

Behind this remarkable run of dividend increases is Potash’s slow progression into becoming a free cash flow machine.  As cash flow from operations has ramped higher in recent years, so too has capital spending as the company has invested in growing its mining operations.  However, going forward, cash from operations (CFO) is expected to remain at current levels while capital spending is set to roll over as the expansions are finalized.  Cap ex is expected to fall to below $1 billion by 2015 after peaking north of $2 billion in 2011.

More to come?

Under this scenario, Potash is staring at least $2.5 billion or $2.89/share of annual free cash flow in the face by 2015.  With a new annual dividend payout of $1.40/share, it’s reasonable to assume that further increases are in store, especially if the price of the underlying commodity were to co-operate.

Potash already had a great story to tell with its dominant position in the global food chain.  Its shareholder friendly dividend policy just makes the story that much better.

In our report “13 High-Yielding Stocks to buy Today” we profile a host of top-notch companies that will have you rolling in dividend cheques before you know it.  Click here for instant access to this free report.

Follow us on Twitter and Facebook for the latest in Foolish investing.

Fool contributor Iain Butler is short $40 July 2013 puts and owns shares outright of Potash.  The Motley Fool doesn’t own shares in any of the companies mentioned.   

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

More on Investing

TIMER SAYING TIME FOR ACTION
Stocks for Beginners

2 High-Growth Stocks to Buy Hand Over Fist This Week

You might not get a better bargain on these two Canadian high-growth stocks if you miss them buying right now.

Read more »

value for money
Tech Stocks

3 Tech Stocks Trading for a Significant Discount

These tech stocks have corrected quite a lot, despite the strength in their business, making them attractive long-term bets.

Read more »

TELECOM TOWERS
Investing

3 Reasons BCE Is 1 of the Best Stocks to Buy Now

In this environment, it's crucial to ensure you own only the very best stocks, which is why BCE is one…

Read more »

Dots over the earth connecting the world
Investing

Global Recession 2022: Hype or Reality?

Whether the current market slump will herald another recession is too soon to tell, but you can still take advantage…

Read more »

ETF chart stocks
Stocks for Beginners

2 Interesting ETFs to Buy for Passive Investing

ETFs are a simple and low-cost way for investors to invest passively for the long haul. Currently, QQQ and XRE…

Read more »

Make a choice, path to success, sign
Investing

1 Defensive Dividend Fund I’d Buy Over Shopify in a Bear Market

BMO Covered Call Utilities ETF (TSX:ZWU) could be one of the best investments you'll make, as the TSX Index risks…

Read more »

edit Safety First illustration
Dividend Stocks

How to Generate Inflation-Proof Passive Income

Inflation-resistant, passive-income stocks like Enbridge (TSX:ENB)(NYSE:ENB) should be on your list.

Read more »

Increasing yield
Dividend Stocks

Dividend Chasers: 3 Stocks With Yields of 8% or More

Three TSX stocks are appetizing for investors whose strategy is to chase after dividend beasts.

Read more »