Canadian Agricultural Stocks to Buy Now for Growth

With the growing demand for sustainable food production, global food security challenges, and innovative technology in farming, here are three agricultural stocks on fertile ground for returns.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published November 29, 2024 8:45 pm EST

Canadian agricultural stocks are cultivating strong growth for investors, and it’s not just about playing in the dirt. There’s real opportunity here. With the growing demand for sustainable food production, global food security challenges, and innovative technology in farming, this sector is a fertile ground for returns. So let’s look at some strong options.

worker holds seedling in soybean field — Source: Getty Images

Nutrien

Nutrien (TSX: NTR) is a giant in the agricultural world, and its recent numbers prove it’s not just coasting on its size. As of its latest earnings, Nutrien reported trailing revenues of $25.6 billion and operating cash flows of $4.6 billion.

Despite some year-over-year dips, its forward price-to-earnings (P/E) ratio of 11.8 suggests the market sees strong growth ahead. Fertilizer demand, especially for potash, continues to soar globally, making Nutrien a key player in addressing food security while delivering a 4.6% dividend yield – an attractive feature for those looking for steady income alongside growth.

Verde

If Nutrien is the brawny giant, Verde Agritech (TSX: NPK) is the scrappy innovator. Focused on sustainable potash production in Brazil, Verde’s current market cap of $33 million belies its potential impact in green farming solutions.

Quarterly revenues have taken a hit, down 23.6% year-over-year, but its focus on sustainability offers a long-term edge. Investors prioritizing ESG (Environmental, Social, and Governance) principles may find Verde Agritech’s story compelling, especially as governments continue to incentivize sustainable agricultural practices.

Ag Growth

Ag Growth International (TSX: AFN) takes a different angle, combining agriculture and engineering by manufacturing grain handling and storage equipment essential for modern farming. Its revenue for the trailing 12 months stands at $1.4 billion, supported by robust operating cash flows of $156 million.

Although the agricultural stock experienced a dip in earnings growth recently, its forward P/E of 9 signals market optimism. As global food logistics grow increasingly complex, Ag Growth International’s technology-driven solutions position it as a cornerstone of efficiency in modern agriculture.

Strong appeal

Agricultural stocks as a whole are benefiting from global tailwinds. With the world’s population approaching eight billion, demand for efficient food production is soaring. Climate change is also challenging traditional farming methods, pushing the adoption of innovative technologies. Canadian agricultural firms are stepping up, exporting their expertise and products globally. This positions investors to benefit from growing global food demands and the technological advancements shaping the future of farming.

Investing in agricultural stocks provides diversification for portfolios, adding exposure to a sector less correlated to tech or finance. Nutrien, for example, has a low beta of 0.95, meaning it’s less volatile compared to the broader market. Ag Growth International and Verde Agritech, while smaller and more niche-focused, bring unique growth opportunities, especially for investors looking to tap into emerging trends in sustainable and technological farming.

Another of the appealing aspects of these stocks is dividends. Both Nutrien and Ag Growth International pay dividends, with Nutrien offering a particularly attractive yield. This makes them not just growth stocks but also viable options for passive income.

Bottom line

While agriculture is tied to risks like weather and geopolitical events, Canadian firms have demonstrated resilience. Nutrien’s global diversification and Ag Growth International’s technology-driven efficiency mitigate many of these risks, offering a balanced approach for investors seeking stability with potential for significant returns. Canadian agricultural stocks are more than just a bet on farming. These represent a strategic opportunity to invest in a sector crucial to our global future. As Nutrien, Verde Agritech, and Ag Growth International continue to innovate and address pressing global challenges, they are not just feeding the world. The agricultural stocks are feeding portfolios too.