RRSP investors face an expensive market right now, but there are still good buy-and-hold stocks selling at cheap prices to put inside a self-directed retirement fund. Let’s take a look at Nutrien (TSX:NTR)(NYSE:NTR) to see why it might be among the best RRSP stocks to buy today.
Nutrien is a global leader in the supply of crop nutrients used by farmers to improve yields from their fields. The Canadian fertilizer giant is the world’s largest producer of potash and is a major player in the nitrogen and phosphate markets.
Nutrien also has a retail division that was formerly part of Agrium before the company merged with PotashCorp to create the new firm. The retail business sells seed and crop protection products to roughly 500,000 farmers around the world. In recent years the company has invested in new digital solutions that it now markets to retail clients to help them turn their businesses more efficiently.
Commodities run in cycles, so you want to buy a stock like Nutrien in the early stages of an upward trend. That seems to be the case today. Fertilizer prices have turned the corner after a multi-year slump and appear to be at the beginning of what could be an extended recovery.
Global crop prices surged last year and remain high on strong demand. As a result, farmers are planting more acreage and ordering more crop nutrients. Nutrien already raised potash production guidance by a million tonnes for the second half of 2021 to accommodate the improved market condition.
PotashCorp and Agrium completed major capital programs before getting together to form Nutrien. This means Nutrien is in a unique position with world-class facilities that can boost output as needed. The business has the potential to generate significant free cash flow by raising production without taking on debt or issuing stock for capital funds to build new sites.
Nutrien says it has five million tonnes of additional potash production capacity it can use to meet rising demand.
The long-term demand picture should also be positive. Populations growth is expected to boost the number of people on the planet from roughly 7.8 billion in 2020 to 10 billion by 2050. Farmers will need to grow more food to feed the extra humans as well as the animals they want to consume. That outlook bodes well for Nutrien and its investors.
Nutrien pays a quarterly dividend of US$0.46 per share. The distribution will likely increase before the end of the year or in early 2022 as a result of the strong market conditions and anticipated free cash flow growth.
Should you buy Nutrien stock now?
Nutrien trades near $72.50 per share at the time of writing. That’s off the 2021 high above $79, so investors currently have a chance to buy the stock on a dip. Additional volatility should be expected, but the outlook for the company over the medium and long term makes Nutrien attractive today for RRSP investors.
It wouldn’t be a surprise to see the share price top $100 by the end of next year, and a surge beyond that level is certainly possible if fertilizer prices see stronger-than-expected upside moves over the next 18 months.
If you have some cash to put to work in a self-directed RRSP, this stock deserves to be on your buy list. Nutrien looks cheap right now and should deliver solid returns.
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.
The Motley Fool recommends Nutrien Ltd. Fool contributor Andrew Walker owns shares of Nutrien.