You know the old saying, “bet the farm” when placing a bet or perhaps some other investment? Well, betting the farm might be a pretty good idea when it comes to dividend investing. See, there are a lot of amazing agribusiness dividend stocks out there that pay great dividends from long term sustainable companies. When looking into agribusiness dividend stocks you might think of companies such as Deere & Company (DE) or perhaps Caterpillar Inc. (CAT) as a starting point for considering your entry into this space for long term dividends. While both companies are great long terms bets and have a history of raising their dividend payouts over the years I am here to tell you about many other agribusiness dividend stocks.
Let’s start with the heavy equipment companies mentioned earlier. Deere & Company (DE) offers a respectable 2.17% yield with a very low payout ratio of about 23.1% ensuring future dividend increases. Likewise, Caterpillar Inc. (CAT) offers a very similar yield at 2.28% with an equally low payout ratio of only 39.0% making sure there is plenty of cash on hand for those quarterly dividends payouts. But let’s look beyond the heavy machinery used on many farms and focus on some other agribusiness plays, namely fertilizers and chemicals. You know, all the good stuff that makes our crops grow with vigor.
Let’s take a look at The Mosaic Company (MOS), Potash Corp. of Saskatchewan, Inc. (POT) and Agrium Inc. (AGU). All three offer some very nice dividend yields and have a short history of raising dividends. Let’s look at each of the three in more depth.
The Mosaic Company (MOS) produces and markets concentrated phosphate and potash crop nutrients for the agriculture industry worldwide. While offering a respectable 2.01% yield with a low payout ratio of 34.8% the odds of a continuing dividend is great.
Potash Corporation of Saskatchewan Inc., together with its subsidiaries, produces and sells fertilizers and related industrial and feed products worldwide. While very similar in business to The Mosaic Company, Potash Corp. offers a much higher yield at 3.92%. Something to consider for all you high yield fans out there. The payout ratio is a bit high when comparing it to Mosaic but it definitely seems sustainable at 84.3%.
Finally, in this space we have Agrium Inc. (AGU) which like the previous two companies mentioned sells fertilizers and chemicals for crop growth promotion. AGU does offer a nice yield of 3.20% with a PE of 14.26 which might make it attractive even at these levels.
Other agribusiness stocks to consider are seed giant Monsanto Company (MON) which produces agricultural chemicals as well as vegetable seeds consisting of tomato, pepper, melon, cucumber, pumpkin, squash, beans, broccoli, onions, and lettuce seeds. MON offers a modest dividend yield of 1.56% and a low payout ratio of 32.9% and has a growing history of dividend payouts going back 14 years. Another one worth mentioning is CF Industries Holdings, Inc. (CF) a company that manufactures and distributes nitrogen and phosphate fertilizer products worldwide. It doesn’t really offer an eye popping yield of only 1.65% but like MON has a very low payout ratio which makes future dividends more likely.
In the moo…d to participate in many of the agribusiness dividend stocks mentioned at once? Why not consider Market Vectors Agribusiness ETF (MOO). This ETF has holdings in many of the companies mentioned and more. For simplicity this ETF will give you a 1.70% yield and exposure to many of the worlds finest agribusiness companies.
All the companies mentioned also fit into one general global theme, the need for more food. As the world population continues to rise the growing demand to be able to continually feed our world only intensifies over time thus ensuring the above companies a place in the world for the long term.
What do you think about agribusiness dividend stocks for the long term?
Disclosure: Long CAT
8 thoughts on “Moo… Agribusiness Dividend Stocks”
Thanks for the post; that’s definitely food for thought (pun not intended!).
I remember considering MON when I was looking for basic materials stocks but I ended up going for ROC, DOW and APD instead. I still have one open slot in that sector though, so it’s definitely something for me to consider again.
APD is a solid long term stock that I am long myself. Though not an “agribusiness” play per se you might want to take a look at Praxair Inc. (PX) which is similar to APD.
I have checked into Potash before. I like there position in the market, but am leery of the overall industry. The fact is that people need to eat and their products will probably always have a market, but I don’t understand the pricing structure well enough to buy.
I totally agree with you about not fully understanding the industry as a whole and pricing structure. As you can see in my portfolio I don’t hold any of the agricultural chemical/fertilizer stocks for some of the same reasons you mention. I’m here to present food for thought about dividend investing. It’s true people will always need to eat but figuring which agribusiness stock to investing might be tricky.
Good post Keith. I’ve heard about some of the fertilizer names you mentioned but haven’t looked into them that much to consider them as an investment right now. Plus I’d have to learn more about that industry in general.
I’d like to add Deere though at some point, kind of wish I had pulled the trigger when shares were trading below 80. While not the highest of yields and the potential for a lot of price volatility, I like their long-term growth story which is summed up nicely on their investor page.
Glad you liked reading this post. The fertilizer/chemical space is something to consider. Personally, I do not own any of the fertilizer stocks myself but have it on my radar. The point of these posts is to offer investing themes and ideas. I feel the theme for a greater food supply to be important and think that a fertilizer play is one that should be considered.