The Canadian mining stocks are worth a second look, especially as various commodities look to experience multi-year tailwinds that might not be so quick to fade. Undoubtedly, the TSX Index is rich with some fantastic miners, and while going with an index fund might be fine to get exposure to the space, I do think that there’s a lot of value to be had by narrowing the focus.
Indeed, from gold and silver miners to the producers of agricultural commodities to energy (think uranium), there are fantastic names that might be worth overweighting, whether you’re looking for long-term appreciation or dividend growth. In this piece, we’ll look at one specific name that I think is worth checking in on, especially after the latest dip into correction territory (that’s a dip of at least 10% from the peak).
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Nutrien stock looks like a timely dividend stock while it’s taking a dive
Enter shares of Nutrien (TSX: NTR), a 3.1%-yielding agricultural commodity player that has some of the best operating economics on the planet. The stock spiked earlier this year, only to give up a big chunk of the ground since peaking in the first half of March. The stock is now down just shy of 14% from the high, but still up close to 13% year to date. Undoubtedly, the $47.5 billion fertilizer firm is no stranger to wild movements. And with ongoing conflict in the Middle East, questions linger as to where the price of various agricultural commodities will settle.
Of course, the latest pullback in Nutrien, as well as various commodities, makes it seem like the impact of the Iran war won’t last. But what if the war ends up dragging into the summer and into the year’s end? As hard as it is to forecast commodity prices into the future, I do think that shares of NTR are oversold and could be a timely bet now that shares are going for less than $100 per share again.
With Jefferies upgrading the stock pretty much right before the name began to peak out, I think investors might be able to get a dollar for $0.85, so to speak. The same bullish points outlined by Jefferies’ star analyst Laurence Alexander, I believe, are still very much in play. He notes that pricing gains amid geopolitical tensions could show up gradually. Indeed, the company certainly stands out as a firm that could benefit if another rally in fertilizer prices ends up in the cards.
The bottom line
Beyond the geopolitics, it’s the long-term tailwinds (need for higher crop yields) that should entice investors the most. At the end of the day, Nutrien is a best-in-breed producer. And with a mere 15.5 times trailing price-to-earnings (P/E) alongside a dividend that’s looking increasingly “growthy” as the firm looks to benefit from the higher cash flows that come with more favourable pricing, I do think the latest dip could prove a timely pick-up for investors seeking greater diversification and a nice, growing dividend.
As the situation in Iran takes unexpected turns, I do think NTR stock could continue to be a choppy ride in both directions, but for those with strong enough stomachs, I think the name has never looked more enticing from the perspective of a long-term investor.
