Trade wars have a way of reshaping the global economy, and few leaders have been as aggressive with tariffs as U.S. President Donald Trump. His previous trade policies disrupted entire industries, particularly agriculture, as tariffs were placed on key goods, shifting the balance of supply and demand worldwide. Now, with Trump once again a dominant figure in U.S. politics, there is renewed speculation about what his trade policies could mean for global markets. For Canadian investors looking to capitalize on these potential shifts, one company stands out: Nutrien (TSX:NTR).
Nutrien stock
Nutrien stock is the world’s largest provider of crop inputs and services, playing a crucial role in ensuring stable food production across the globe. With its stronghold in the fertilizer market, especially in potash, nitrogen, and phosphate, Nutrien stock is well-positioned to benefit from the rising demand for food security amid trade tensions. As Trump imposes tariffs on agricultural goods from key U.S. trading partners, they could drive up costs and limit the supply of essential farming products. This would put companies like Nutrien stock, which has a well-established supply chain, outside of U.S. control. Thus, Nutrien is in a prime position to gain market share.
Recent earnings reflect some short-term struggles, but the company’s long-term prospects remain solid. In its most recent Q3 2024 earnings report, Nutrien stock reported net earnings of $25 million ($0.04 per diluted share). This was a decline from previous quarters, largely due to softer fertilizer prices and ongoing global economic headwinds. However, despite these short-term pressures, Nutrien stock remains a dominant player in the agricultural sector with a strong balance sheet, stable cash flow, and a commitment to returning value to shareholders.
Looking at historical performance, Nutrien has weathered a variety of market conditions, proving its resilience. Its five-year average dividend yield of 3.5% and current forward dividend yield of 4.2% highlight its appeal as a strong income-generating stock. While the payout ratio currently sits at a high 145.3%, this reflects a temporary dip in earnings rather than long-term sustainability issues. The company’s ability to generate cash flow remains robust, with operating cash flow at $4.6 billion over the trailing 12 months.
A growing investment
From a valuation perspective, Nutrien stock appears attractively priced. Its forward P/E ratio of 14.5 is reasonable for a company with strong global demand and potential upside from geopolitical factors. Moreover, with shares currently trading at approximately $74, well below its 52-week high of $83.14, investors have the opportunity to buy in at a discount before a potential rally. If trade tensions escalate, food security concerns could drive increased demand for fertilizers, boosting Nutrien’s revenue and profit margins.
Another key factor supporting Nutrien’s long-term potential is its strategic positioning within Canada’s rich resource sector. Canada is one of the world’s largest potash producers. Nutrien stock, headquartered in Saskatchewan, benefits from access to some of the highest-quality deposits globally. While U.S. farmers face supply chain disruptions from tariffs, Nutrien can step in as a stable, non-U.S. supplier, further solidifying its competitive advantage.
As Trump reignites trade wars, tariffs on fertilizers, grains, and other agricultural products could create ripple effects throughout the sector. Given Nutrien’s extensive distribution network and non-U.S. production facilities, the company would be insulated from direct tariff impacts, all while simultaneously benefiting from rising demand outside the U.S. This makes it an attractive hedge against geopolitical instability, particularly for Canadian investors looking to profit from shifting trade dynamics.
Bottom line
For investors with $10,000 to allocate, Nutrien stock presents a unique opportunity to gain exposure to a sector that is both defensive and positioned for long-term growth. While short-term earnings pressures have weighed on the stock, the company remains financially strong and well-positioned for the future. Considering its high dividend yield, strong market position, and potential for stock appreciation amid trade disruptions, Nutrien stock is a compelling pick for investors seeking both growth and passive income.
