Tuesday, September 24, 2013

Dividends & Income from Potash POT

The world’s population continues to grow as does the need to feed people.   This fact is real no matter what the Federal Reserve’s policy on borrowing is or how dysfunctional our Congress is.  Economies can grow and contract, but the need to feed an ever growing population is permanent.   

Growing food requires fertilizer.

Con Agra (CAG) and DuPont (DD) were part of my portfolio until recently.   CAG’s stock price increased and forced me to set a stop.   When CAG weakened, the stop was hit.  DuPont (DD) and Dow Chemical (DOW) did not perform quite as poorly.   I lost my position in each of these two companies when I sold calls at strike prices that provided significant profit.  

I want investments in this space.  I think opportunities exist that will duplicate my experience with CAG, DD and DOW and provide income with capital gains.

Use Market Volatility to Find Bargains.

Potash (POT) is my target.   Potash’s stock price took a terrible plunge the end of July from $44 per share to $28 per share.  The plunge was related to a quarter of weak earnings.   All of the stocks in this space tend to be volatile, but POT is more volatile because its mines are in unstable places and can be affected by local unrest.    Lately, POT has scratched its way back up to the low $30’s.   I think this is a bargain price for yield hungry investors.

Take Profit and Reinvest for More Income.

Like all companies in this space, POT has been a regular dividend producer.   Although POT is not technically a Dividend Machine because it has not consistently raised the dividend every four quarters, the ten year dividend history is encouraging.    

If you owned POT in 2003 you would have received $.25 per share in quarterly dividends and today you get $.35 per share; a forty percent increase in income over ten years.

As an income investor I will move my proceeds from CAG, DD and DOW which provided just above three percent to POT which yields 4.34%.    Moreover, POT like these other companies, has enough volatility to provide covered call income potential.

Dividend Fundamentals.

This table presents the key data I use to determine if I want to buy a stock.   

Notice that POT pays a 4.34% dividend yield with a very low debt to equity ratio of .35.    Even during the rough years of 2008 and 2009, POT continued to pay a dividend.

This investment is not for the investor who cannot tolerate volatility.   However, the patient income investor, I think, will benefit from owning POT.   Do your own research; and there is plenty of opinion about this stock; then decide if POT’s enticing yield of 4.34% fits into the income producing portion of your portfolio.

The Money Madam