In this piece, we’ll check in on an incredibly affordable TSX dividend stock that I’d be more than willing to hold for the next several years. Of course, it’s been a smooth ride for the TSX-focused large-cap dividend stocks so far this year, and while the discounts have narrowed with most names that now yield far less than they did just over a year ago, I still think there’s value to be had with the names that are still facing subtle industry headwinds.
Let’s have a look at one dirt-cheap Canadian dividend stock that seemingly got left behind as some of the nation’s best income stars rose smoothly in this great TSX bull run.
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Nutrien
Shares of agricultural commodity producer Nutrien (TSX: NTR) are back on the descent after a parabolic spike that ended with a blow-off top in March. Fertilizer prices are in a rather peculiar spot as the on-again, off-again conflict in the Middle East continues to bring forth immense market volatility. Indeed, it’s hard to tell when the Strait of Hormuz will get back up and running at full speed without constant disturbances.
Either way, I think shares of NTR remain a great value buy for income investors who want a bit of growth potential on the cheap. At the time of this writing, shares of the fertilizer play go for just 13.5 times trailing price to earnings (P/E), making it far cheaper than the broader TSX Index, with a yield that’s incredibly generous and well-covered by incoming free cash flows.
Of course, when it comes to commodity plays, it can be difficult to time things, given the large number of exogenous variables that can move a stock. As hard as Nutrien can be to time, I think the name is worth hanging onto for prolonged periods, especially after bearish drawdowns. The 3.3% dividend yield is more than enough incentive to ride out the waves, at least in my view. And on any further depreciation, the name is worth adding to as the yield rises and the expectations bar looks to fall that much further.
The stock is now more than 18% off its 52-week highs but closer to 31% off its 2022 all-time highs. Indeed, more geopolitical uncertainty could pave the way for a choppier ride, especially now that the trend is lower. At the same time, the ag customer centre (the retail arm of the business) acts as a nice stabilizer during the harshest commodity price swings.
The bottom line
It’s an intriguing asset that I think makes NTR stock far easier to stomach, especially when fertilizer prices stay stuck in a range that’s less than ideal. Add the share buyback potential into the equation, and it’s clear that Nutrien is more than just a cheap dividend stock; it’s a great shareholder-friendly firm with a wide moat and a strong operating track record.
Of course, there are cheaper, yield-heavier Canadian stocks out there, but none, I believe, are as intriguing as Nutrien, especially as investors turn against the name due to mounting uncertainty. It’s times like these, when the future is hazy and a bit jittery, that it tends to be a great time to buy one of the smoothest fertilizer producers on the planet.
