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What are we looking for?

Sustainable dividends from North American-based agricultural leaders.

The screen

Agriculture stocks aren’t flashy like, say, tech stocks. Still, they benefit from strong recurring sales, as well as the expanding food needs of a growing world population.

Given heightened global uncertainty, we think it’s less risky to focus on industry companies with production and a major customer base in North America. The best of those leaders also access global markets for sourcing and sales.

Top agricultural stocks have seen price gains lately on stronger profits – that explains the relatively low dividend yields. Still, the stocks have room to move higher while paying sustainable dividends.

From a list of Canadian and U.S. dividend payers, we identified leaders showing this kind of improved profitability. We then applied our TSI Dividend Sustainability Rating System.

  • One point for five years of continuous dividend payments – two points for more than five;
  • Two points if it has raised the payment in the past five years;
  • One point for management’s commitment to dividends;
  • One point for operating in non-cyclical industries;
  • One point for limited exposure to foreign currency rates and freedom from political interference;
  • Two points for a strong balance sheet, including manageable debt and adequate cash;
  • Two points for a long-term record of positive earnings and cash flow to cover dividends;
  • One point if the company’s an industry leader.

Companies with 10 to 12 points have the most secure dividends, or the highest sustainability. Those with seven to nine points have above average sustainability; average sustainability, four to six points; and below average sustainability, one to three points.

More about TSI Network

TSI Network is the online home of The Successful Investor Inc. – the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, The Successful Investor, and The TSI Dividend Advisor. TSI Network is also affiliated with Successful Investor Wealth Management.

What we found

Agriculture stocks that offer food for thought in an uncertain world

Ranking*CompanyTickerDiv. Sustain. RatingPointsDiv. Yld. (%)Mkt. Cap. ($ Mil.)**1Y Ttl. Rtn. (%) Recent Price ($)**
1Nutrien Ltd.NTR-TAbove Average82.068,793.664.8119.10
2Archer Daniels MidlandADM-NAbove Average82.046,553.041.081.45
3Bunge Ltd.BG-NAbove Average72.015,269.131.8104.06
4CF Industries HoldingsCF-NAbove Average71.419,665.080.388.16
5Mosaic Co.MOS-NAbove Average70.821,520.374.357.57
6Ag Growth Int'l Inc.AFN-TAverage61.5744.0-0.840.79

Source: Dividend Advisor

*Ranking is determined by TSI Dividend Sustainability Score. Where overall points are the same, analysts considered P/E, dividend yield and industry outlook to decide final placements. **Share price and market cap are in native currency

Our TSI Dividend Sustainability Rating System generated six stocks. Bunge Ltd., based in Missouri, is the world leader in oilseed processing, and while its primary operations are in North and South America, it benefits from worldwide distribution. Chicago’s Archer Daniels Midland Co. processes myriad crops and operates globally, although its core business is in the United States. CF Industries Holdings Inc., based near Chicago, is a leading manufacturer and distributor of agricultural fertilizers. All but two of its plants are in North America.

Florida’s Mosaic Co. serves customers worldwide from its production facilities in the United States, Canada and South America. Nutrien Ltd., headquartered in Saskatoon, will continue to profit from strong global demand for fertilizer. While it sells worldwide, virtually all of its facilities are in Canada and the U.S. Winnipeg’s Ag Growth International Inc. mainly sells grain and rice handling, storage and conditioning equipment; most of its manufacturing is in Canada and the U.S.

We advise investors to do additional research on any investments we identify here.

Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.

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