There are two things Canada doesn’t have proportional to its size: population and agricultural output. It’s the second-largest country in the world by area, but it’s barely in the 20 largest agricultural countries in the world and doesn’t even crack the top 30 in population.
There are relatively few significant publicly traded agricultural companies. But there are still a handful of good options, and it’s a good way to diversify your portfolio.
A fertilizer leader
Nutrien (TSX:NTR) is an exception in the otherwise modest agricultural industry of Canada. Not only is it one of the most significant blue-chip stocks in Canada, but it’s also one of the largest fertilizer companies in the world.
It dominates the global potash market and is the third-largest nitrogen producer in the world. Both potash and nitrogen are primary fertilizer elements, and this dominance extends Nutrien’s reach across the globe.
Nutrien is financially healthy as well, and even though it carries a significant amount of debt (around $20 billion), it’s a manageable number considering the revenue levels of the company. Right now, the Nutrien stock is both discounted and attractively valued.
The company has lost nearly 47% of its valuation from its 2022 peak, and though it’s a nightmare from a valuation perspective, it’s a blessing for dividend investors.
Thanks to the slump, the company is offering dividends at an attractive 3.9% yield. The payout ratio is quite healthy as well at 47%. The company is also growing its payouts steadily and at a good pace of 23% in the last five years. Assuming the fundamentals will help the stock grow in the long term and the company will maintain/grow its payouts, Nutrien is an amazing agriculture stock to buy today.
An agriculture infrastructure company
Ag Growth International (TSX:AFN) offers a different kind of exposure to the agricultural sector. The company develops infrastructure solutions and equipment for the agricultural sector, and they have an impressive portfolio of products and services.
This ranges from bins/silos and conveyors to boilers. The company also offers monitoring solutions and other technologies to help individual farmers and commercial farming operations.
Ag Growth is also a dividend payer, but its yield is currently nowhere near as good as Nutrien’s (1.1%). Its growth has historically been cyclical and, in the most recent bull market phase that the stock is still riding, it pushed its value up by 96% in a little over two years.
Considering its potential and diverse portfolio, Ag Growth can be a decent long-term pick but you might consider waiting for a discount. This will increase your chances of making a decent profit through capital appreciation, and you will lock in a better yield.
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Foolish takeaway
The two agriculture stocks offer different types of exposure to the industry. Nutrien is a fertilizer king on an international level, while Ag Growth is an infrastructure and equipment company that supports the agricultural industry in various facets.
