3 Reasons Why Agrium Inc. Is a Buy-and-Hold Stock

With global food demand on the rise, fertilizer company Agrium Inc. (TSX:AGU)(NYSE:AGU) is a solid long-term play for dividend investors.

The Motley Fool

Fertilizer stocks such as Agrium Inc. (TSX:AGU)(NYSE:AGU) have mostly traded sideways the last couple of years. However, Agrium got a boost earlier this year after activist investor ValueAct Capital accumulated a large position in the fertilizer and agricultural chemicals company. And there are other fundamental reasons why Agrium is worth watching, despite its high valuation.


Everyone has to eat and a play on farming is a smart move for investors. In addition, population growth and rising incomes in emerging markets will produce changes in diet and increases in global food demand, says Peter Brieger, chairman and managing director of GlobeInvest Capital Management.

Brieger says the long-term trends supporting Agrium’s future remain potent despite some volatility. When the stock does dip substantially, he takes the opportunity to top up.


Agrium’s main market is farmers, and that helps reduce some of the commodity risk for investors. While corn or soybean prices can oscillate from quarter to quarter or even year to year, farmers will always need agricultural chemicals.

Continued population growth worldwide, but no real expansion of farmland means a constant strain on farmers to keep yields high, and that translates to heavy reliance on fertilizers.

In addition, Agrium has an integrated model, with both wholesale production and 1,400 retail operations around the world, limiting its volatility.


Agrium has a healthy dividend yield of 3.2% and is expected to generate $11 a share of free cash flow by 2017, according to Brieger. Assuming Agrium pays out 50% of free cash flow, he says dividends could reach $5.50 per share, a 45% increase from current levels.

On top of the dividend, a stock-buyback plan to repurchase up to 5% of outstanding shares will add additional stability to Agrium’s stock and future earnings, making it a solid long-term play for dividend investors.

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.

Fool contributor Doug Watt has no position in any stocks mentioned. Agrium Inc. is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

Dividend Stocks

2023 TFSA Contribution Time: 2 Dividend Stocks to Buy With $6,500

Buy these two great dividend stocks in your TFSA as a part of a diversified portfolio if you haven't already.

Read more »

Construction work on a site
Dividend Stocks

Canadian Infrastructure Stocks: Building the Future and Your Wealth

These two Canadian infrastructure stocks are highly defensive and offer excellent long-term potential, making them ideal for this uncertain market.

Read more »

Dividend Stocks

Dividend Investors: Top Canadian Utility Stocks for June 2023

These three top utility stocks could be excellent buys for income-seeking investors.

Read more »

A tractor harvests lentils.
Dividend Stocks

Why Nutrien Stock Is Still a Great Buy on the TSX Today

Nutrien (TSX:NTR) stock has gone through major ups and downs thanks to outside influences, but its bottom line remains incredibly…

Read more »

Businessperson's Hand Putting Coin In Piggybank
Dividend Stocks

Build Your Retirement Fortune With These Top TFSA Stocks

Here are two top Canadian dividend stocks you can add to your TFSA to build wealth for retirement.

Read more »

Path to retirement
Dividend Stocks

Invest in These Stocks for a Worry-free Retirement Income Stream

Are you looking for an income stream that can pay you throughout your retirement? Then invest a portion of your…

Read more »

Dividend Stocks

Is BCE Stock Still a Top Telecom Investment in Canada?

Canada’s telecoms can provide growth and income in a defensive shell. Let’s see if BCE is still a top telecom…

Read more »

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

2 Canadian Dividend Stocks I’ll Be Buying Hand Over Fist in June 2023

These two beaten-down Canadian dividend stocks could help you earn handsome returns on your investment in the long term if…

Read more »