This Canadian Agricultural Giant Is a Must-Have Stock If You Want to Retire Rich

Load up on shares of the Canadian agricultural Nutrien Ltd (TSX:NTR)(NYSE:NTR) as it realizes significant post-M&A synergies and accelerates its global growth.

| More on:

Investors are used to Canadian companies having a tough time finding success in a world dominated by deeply entrenched U.S. titans. For every Canadian success story, there are at least two dozen in the U.S., which can sometimes be disheartening for patriotic Canadians who bleed maple syrup.

However, every now and then, we find a company that overshadows its U.S. and European counterparts to blaze a new trail and lead so that others around the world may follow.

The stock and the play

One of those rare examples is Nutrien (TSX:NTR)(NYSE:NTR), a global leader in agriculture solutions with the goal of feeding the future. Well, that’s a good thing because the global population in 2030 will reach almost nine billion people — and they will need to be fed.

For those Fools who are familiar with my investing style, I like to find companies that are aligned to global macro-trends with a unique proposition that solves the biggest problems facing humanity. A recent example of that was my view on the clean energy trend and how to play it profitably.

Nutrien aims to lead the food industry in innovation and bold new thinking with agricultural nutrients and solutions to grow a better world.

While it may not be apparent to many Canadians who shop at grocery stores brimming with fresh produce, the world is under-nourished and there is a significant increase in demand for food.

According to the Food and Agricultural Organization of the United Nations, more than 820 million globally suffer from chronic hunger; the cost of malnutrition in the U.S. alone is $3.5 trillion.

Fixing the world’s nutrition problem is in Nutrien’s wheelhouse, which is why I am ultra bullish on it as a long-term investment.

Nutrien takes advantage of the whole “food chain”

Nutrien starts with the basic building blocks of good crop nutrition: Potash, Nitrogen, and Phosphate. These nutrients are essential to crop growth and Nutrien is a top producer for two of the three.

It’s the world’s largest Potash producer and the third-largest Nitrogen producer.

This scale alone is a big advantage, but Nutrien doesn’t stop there. It then moves to seeds solutions, which is a fancy way of saying that it carries all seed brands that growers would ever be interested in, including proprietary seed breeding capabilities in crops the world is demanding more of, like canola, rice, and cotton.

In short, Nutrien has built core expertise and scale in the entire food growing supply chain and is now indispensable to the global food industry. Smart investors always invest in companies that are needed to solve big problems like world hunger and nutritional deficiency.

The financial firepower to back up the food expertise

Nutrien isn’t just a collection of smart people wanting to solve the world’s food problems. Rather, the company has also built solid financials and a strategic road map to appeal to the most discerning of long-term value investors.

The company posted $3.9 billion in EBITDA for 2018 and management expects EBITDA to grow to almost $7 billion at the high end over the next five years as of 2023.

In addition, Nutrien also plans to drive shareholder value over the next few years by accretive M&A activity, margin expansion and improving working capital and technology. In short, the company has a lot of levers it can pull to continue to drive EBITDA growth.

The final verdict

Nutrien is a cash powerhouse with a price to cash flow (P/CF) ratio of about 12 and a forward-looking price to earnings (P/E) ratio of about 15. These multiples and a stock price of around $66 at the time of writing means that investors may not be getting a huge bargain-basement stock price here.

But then again, you never expect a fire sale for genuine Gucci handbags either. The point is that sometimes you have to pay up for high-quality stocks and this stock is the real deal with the scale and ability to grow cash flow and dividends reliably well into the future.

Smart investors who have their eye on the long game can start nibbling on Nutrien at these levels and slowly accumulating a position on stock price dips. Before you know it, you will have built up a nice position setting you up for a happy retirement.

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 Rahim Bhayani has no position in any of the stocks mentioned. Nutrien Ltd. is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

growing plant shoots on stacked coins
Dividend Stocks

4 Ways to Grow $100,000 Into $1 Million in Retirement Savings

Anyone can build a million-dollar retirement portfolio. Here are four ways you could practically grow $100,000 to $1 million.

Read more »

A shopper makes purchases from an online store.
Dividend Stocks

3 Reasons to Buy TFI Stock Like There’s No Tomorrow

TFI stock (TSX:TFII) had a hard 2023, but now it's set up for a solid 2024, with an acquisition that…

Read more »

Dividend Stocks

5 Secrets of TFSA Millionaires

These lesser-known secrets can help you set up the perfect long-term portfolio and achieve a million-dollar TFSA!

Read more »

analyze data
Dividend Stocks

How to Build a Powerful Passive-Income Portfolio With Just $20,000

These fundamentally strong TSX stocks have paid and increased their dividend in all market conditions. Add these stocks to build…

Read more »

Canadian stocks are rising
Dividend Stocks

iShares S&P/TSX Capped REIT Index ETF (TSX:XRE): Why I Like this ETF Better Than a Rental Property

XRE is a great ETF for gaining exposure to the Canadian real estate sector.

Read more »

Payday ringed on a calendar
Dividend Stocks

3 High-Yield Dividend Stocks That Pay Cash Every Month

These three dividend stocks all offer high yields and have sustainable dividends, making them some of the best investments to…

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

3 Stocks That Could Create Lasting Generational Wealth

If you want to start transferring over your wealth, you'll need to actually have some! And these are three stocks…

Read more »

data analytics, chart and graph icons with female hands typing on laptop in background
Dividend Stocks

Down by 25%: Is Canadian Tire Stock a Buy in February 2024?

Take a closer look at this Canadian retail stock if you are looking for low-cost additions to your self-directed portfolio…

Read more »