Buying dividend stocks when they’re down can be a strategic long-term move. It allows investors to lock in higher dividend yields and benefit from potential capital appreciation as the stock recovers. In fact, many high-quality companies experience temporary declines due to market volatility or short-term challenges, but their fundamentals remain strong.
This offers an attractive entry point for long-term investors seeking both income and growth. Over time, this strategy can significantly enhance total returns, combining steady dividend income with capital gains. But there’s one in particular investors may want to check out.
Nutrien
Nutrien (TSX:NTR) is one of the world’s largest producers of potash as well as a significant player in the production of nitrogen and phosphate-based fertilizers. The company’s operations are strategically located in key agricultural regions, allowing it to supply essential crop nutrients to farmers across the globe, thereby supporting food production and sustainability.
Financially, Nutrien has consistently demonstrated strong performance, driven by its diversified portfolio of products and its global reach. The company benefits from favourable market conditions in agriculture, particularly in times of rising crop prices, which boosts demand for its fertilizers. Furthermore, Nutrien stock has also been active in optimizing its operations. This has come from reducing costs and enhancing efficiency, which has helped maintain healthy profit margins, especially given the increasing global need for food security and sustainable farming practices.
From an investment perspective, Nutrien’s strategic initiatives, including expansion into digital agriculture and sustainable farming practices, provide avenues for future growth. As a major player in an essential industry, Nutrien stock is well-positioned to continue benefiting from global trends, all of which contribute to long-term value creation for shareholders on the TSX.
OK, but what about right now?
Nutrien stock experienced a volatile period recently, with its stock performance being influenced by a number of factors. These include changes in global agricultural markets, macroeconomic conditions, and company-specific developments. In particular, prices for key crops like corn and wheat have seen declines, which in turn reduced the demand for fertilizers, impacting Nutrien’s revenues and profitability.
One of the significant influences on Nutrien’s stock performance has been the global economic environment. Additionally, geopolitical tensions, including the conflict in Ukraine, have disrupted agricultural supply chains and added uncertainty to the global market. This has all impacted Nutrien stock’s operations and stock price.
Despite these challenges, Nutrien has attempted to mitigate the impact through strategic measures; Nutrien has taken strategic cost-cutting initiatives and focused on digital and sustainable farming practices. The company has also continued to return value to shareholders through dividends and share buybacks, which has helped support the stock price to some extent. However, investor sentiment remains cautious.
It’s valuable
Considering all this, now is a great time to buy Nutrien stock. These current circumstances are temporary, offering immense value. In fact, Nutrien now appears undervalued, particularly when considering its forward price-to-earnings (P/E) ratio of 11.20 compared to its trailing P/E of 28.70. Furthermore, its price-to-book (P/B) ratio of 0.90 indicates that the stock is trading below its book value. These suggest potential undervaluation and a margin of safety for investors.
Despite the company’s recent revenue and earnings declines, with a 13% drop in both year-over-year revenue and net income, Nutrien stock maintains a strong operational base. The company also has a robust cash flow, with $5 billion in operating cash flow. These figures support the sustainability of its 4.72% forward annual dividend yield, making it an appealing option for income-focused investors.
Bottom line
Nutrien’s financial position is solid, with a manageable debt-to-equity ratio of 53.14% and a current ratio of 1.26. This shows it holds sufficient liquidity to cover short-term liabilities. While the dividend stock has seen a significant decline over the past year, falling 26.5% in the last year, this dip may present a buying opportunity for investors — especially for those who believe in the company’s long-term growth potential, particularly given the forecasted revenue growth of 3.7% per annum over the next three years.
