Monday, June 30, 2014

Dividends & Income POT, Potash the next 2014 Dividend Machine

Diversification comes in many flavors.   Some advisers concentrate on percent of bonds versus percent of stocks.   Other advisers suggest some growth and some value.  Then there are advisers who want you to have some small cap stocks and some large cap stocks to achieve diversification.   Another diversification goal is to have some global or international stocks as well as some domestic stocks.

The Dividend Machine I am profiling today is a Canadian Company that trades on both the Toronto stock exchange as well as on the U.S. stock exchange. 
Potash of Saskatchewan, symbol POT, is my next 2014 Dividend Machine.  With the selection of this stock, we add a bit of diversification to the 2014 model portfolio.

Regarding diversification using the Dividend Machine strategy, I never pick a stock just to diversify a portfolio on any level, growth versus value, one sector over another, or international exposure.   Looking back at the previous model portfolios profiled in this blog, I find that the model portfolios end up being well diversified on every level just by using a simple, disciplined strategy of stock selection.   Diversification seems to be a desired side effect of using this strategy.

Now let’s look at POT’s Dividend Machine fundamentals.

Potash, POT, Dividend Machine Fundamentals.

Potash has been around a long time.  This is a description of the company in their own words:  We are the world’s largest integrated fertilizer and related industrial and feed products company by capacity. We are the largest producer of potash worldwide by capacity.  Read more:

The world is hungry and it needs Potash to help grow food for billions of people.

Potash distributes a big piece of the earnings pie; $1.40 dividend on $.180 of earnings for a yield of 3.68%.    Five years ago, their quarterly dividend was $.10 and today it is $.35.   Those big annual dividend increases translate to an average annual increase of about 50%.   For income investors who want income growth, try Potash, symbol POT.  Potash is a solid company.   Their D/E (debt to equity ratio) is .4487.   

Remember, I use only four criteria to select a 2014 Dividend Machine.  (1) Earnings must be greater than the dividend at least during the past four quarters (2) Dividend yield has to be 3.5% or greater (3) Dividend increases over 5 years had to be at least 4% per year on average and (4) D/E ratio should be 1 or less or equal to the industry standard.

The table below presents POT’s Dividend Machine Fundamentals.

Fixed income investors should consider a stock like Potash, POT,  for the income producing portion of their portfolio.