Investing in dividend stocks when prices are down is a strategy that's not just about getting a bargain. It's about amplifying your returns. Imagine spotting a coveted item on sale at your favourite store: not only do you pay less, but you get the same quality product.
Now, imagine that this product comes with a feature that grows in value the less you pay. That's exactly what happens with dividend stocks. When a stock's price falls, its dividend yield increases, offering savvy investors a better return for every dollar invested. It's the financial equivalent of a double win, and Nutrien (TSX:NTR) is a shining example of why this approach works.
Why Nutrien?
Nutrien is a global leader in agricultural solutions, providing crop nutrients and services to farmers around the world. Currently, its stock is trading at $68.07 per share on the TSX, down from its 52-week high of $83.14. While this decline might concern some, it's an enticing opportunity for dividend investors. Why? Because Nutrien's forward annual dividend rate of $2.99 now yields approximately 4.34%. That's significantly higher than its five-year average yield of 3.45%. In simple terms, you're getting more income for less investment. It's like grabbing the last discounted item on a shelf before everyone else realizes it's on sale.
Digging into Nutrien's recent financials shows why the stock is still a strong contender. In the third quarter of 2024, Nutrien reported adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $1 billion, thus underscoring its ability to remain profitable despite market challenges. Sure, earnings were lower year over year, but this is part of the cyclical nature of the agricultural sector. Nutrien's potash segment, a cornerstone of its business, delivered record sales volumes of 11.1 million tonnes in the first nine months of the year. This performance prompted Nutrien to revise its full-year potash sales guidance upward to 13.5 to 13.9 million tonnes — a sign of confidence in its operational strength.
Beyond its core financials, Nutrien's shareholder-focused initiatives make it particularly attractive. The dividend stock has consistently returned value to investors through dividends and share repurchases. In the second half of 2024 alone, Nutrien repurchased 1.5 million shares for about $75 million. This buyback program reduces the number of outstanding shares, effectively increasing the value of each remaining share. Combine that with a steady dividend payout, and it's clear Nutrien prioritizes its investors, even in tougher times.
Looking ahead
What makes Nutrien especially intriguing is its proactive approach to navigating market conditions. The dividend stock committed to achieving approximately $200 million in annual consolidated savings by 2025, a target it expects to reach ahead of schedule. These cost-saving measures, coupled with its strong market presence, position Nutrien for continued resilience and growth.
Another factor in Nutrien's favour is its valuation. The dividend stock's forward price-to-earnings (P/E) ratio of 12.50 is considerably lower than many of its peers, suggesting the stock may be undervalued. For long-term investors, this represents an opportunity to buy into a market leader at a discount. Coupled with the higher yield resulting from the stock's recent price dip, this makes Nutrien a compelling option for both growth and income-focused portfolios.
Looking ahead, Nutrien's focus on operational efficiency and market expansion provides a clear growth trajectory. The dividend stock's strategic initiatives, including enhancing its digital agriculture offerings and expanding its retail network, are designed to capture market share and drive profitability. These moves align with broader trends in the industry, such as the increasing adoption of technology in farming and the push for sustainable agricultural practices.
Foolish takeaway
Buying dividend stocks like Nutrien while they're down isn't just like getting a deal. It's like getting an upgraded version of your favourite product at a lower price. You secure a higher yield, position yourself for future appreciation, and invest in a dividend stock that's committed to rewarding its shareholders. Nutrien's strong fundamentals, shareholder-focused strategies, and promising industry outlook make it a standout choice. So, while the market may be looking elsewhere, this is your chance to grab a gem at a bargain and enjoy the dividends.
