Canadian investors are searching for buy-and-hold stocks to boost returns in their TFSA portfolios.
Nutrien was formed through the merger of Potash Corp. and Agrium. The two Canadian companies already marketed their potash production together through their Canpotex partnership, and it simply made sense to combine the potash, phosphate, and nitrogen operations. In addition, Agrium’s strong retail business provided a more balanced revenue stream, making Nutrien arguably more attractive for investors than the two companies might have been had they remained independent.
Nutrien has already achieved US$246 million in run-rate synergies and anticipates hitting US$350 million by the end of the year, well ahead of the US$250 million initially targeted for 2018.
Nutrien reported strong results for Q2 2018, and more good news should be on the way. Adjusted net earnings came in at US$1.48 per share, and adjusted EBITDA was US$1.6 billion.
For the first half of 2018, retail EBITDA rose 10% compared to last year, supported by solid margins on seed and crop protection sales and strong demand for crop inputs. Potash segment EBITDA rose 34% due to higher realized prices, good offshore demand, and reduced production costs. Nitrogen EBITDA improved by 17%.
As a result of the strong start to the year and a positive outlook for crop nutrients demand and pricing, Nutrien has upgraded its guidance for 2018. The company anticipates full-year adjusted earnings of US$2.40-$2.70 per share compared to previous guidance of US$2.20-$2.60 per share. Adjusted consolidated EBITDA guidance is now US$3.7-$4 billion, compared to earlier expectations of US$3.3-$3.7 billion.
Nutrien continues to expand its retail operations through strategic acquisitions, including the purchase of 29 retail locations it made during the first quarter of the year. In addition, Nutrien recently announced deals to buy Waypoint Analytical and Agrible to boost its digital ag and omni-channel segment.
Nutrien pays a quarterly dividend of US$0.40 per share. That’s good for an annualized yield of 2.9%. Rising demand for crop nutrients and improved pricing bodes well for future cash flow, and investors should see Nutrien deliver strong dividend growth in the coming years.
Should you buy?
The stock has moved from $56 in February to the current price of $74 per share, supported by the positive Q1 and Q2 numbers. More gains should be on the way, given the improving outlook for the global fertilizer market.
If you are searching for a buy-and-forget pick for a TFSA retirement fund, Nutrien looks attractive today.