Nutrien (TSX: NTR) stock has been trading on a negative note for nearly two years now. After tanking by around 25% in 2023, NTR stock has lost 6% of its value so far in 2024 to currently trade at $70.04 per share with a market cap of $34.5 billion. While this negative movement in its shares might reflect a challenging environment for the global agriculture industry, Nutrien’s 4.2% annualized dividend yield still looks attractive for long-term, income-focused investors.
But is it the right time to buy Nutrien stock just for its dividend? In this article, I’ll try to answer that question by analyzing the company’s business fundamentals, dividend stability, and growth outlook. But first, let’s take a quick look at the key reasons why NTR stock has struggled over the past two years.
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Nutrien stock
If you don’t know it already, Nutrien is one of the world’s largest providers of crop nutrients, including potash, nitrogen, and phosphate fertilizers, which are essential for global food production. In 2023, the company faced a tough market with declining fertilizer prices and lower profitability across its core segments. NTR’s total revenue for the year was US$29.1 billion, reflecting over 20% YoY (year over year) drop due to a broad decline in agricultural input prices and global economic uncertainties.
The negative impact was felt across Nutrien’s product lines last year, from potash to nitrogen and phosphate, with each segment reporting lower average selling prices and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization). This could be the main reason why Nutrien stock has been under pressure.
Gradually improving fundamentals
Although it’s true that Nutrien’s fundamentals were heavily impacted in 2023, recent developments hint at a potential recovery. In the second quarter of 2024, the company reported a 10.9% YoY decline in its total revenue to US$10.2 billion as continued pressure on fertilizer prices weighed on sales.
However, its adjusted EBITDA for the quarter came in at US$2.2 billion, signalling resilience despite a challenging market. Nutrien attributed this to strong crop input demand, particularly in North America, alongside increased potash sales volumes and cost efficiencies across operations. Overall, the company’s continued focus on lowering operating costs helped it offset some of the pricing pressures and stabilize profitability.
In addition, Nutrien’s retail business stood out as another bright spot, with an increase in adjusted EBITDA to US$1.2 billion in the first half of 2024, largely supported by normalized product margins and strong grower demand. Interestingly, the retail segment continues to be a steady contributor to the company’s cash flow, which is important for sustaining its dividend payouts.
Is now the right time to buy Nutrien stock?
While Nutrien stock has struggled in the past two years, recent indicators suggest a potential turning point. The company’s proactive measures to streamline operations, especially in Brazil, and its focus on core strengths in potash and retail could help it benefit from a gradual recovery in the agriculture industry.
Even as Nutrien faces macroeconomic and regional challenges, its management’s focus on cost-control measures and cash flow generation provides a degree of confidence in its dividend’s stability. Considering that, the 4.2% dividend yield makes Nutrien an attractive stock for long-term, income-seeking investors.
Note that Nutrien will announce its third-quarter results after the market closing bell on November 6, which could provide further insights into its recovery trajectory.
