Whether it’s phosphates, sulfur or nitrogen, agriculture stocks have stunk up the market this year. Agrium (AGU), which sells all three through both wholesale and retail, has seen its stock fall 15% for the year-to-date, lagging the S&P 500 by 33 percentage points.
The problem is a corporate/diplomatic clash between Belarus and Russia over a cartel that controls 40% of global phosphate production. The cartel might — might — be falling apart, causing prices to plunge for all fertilizers.
That been brutal for everyone in the business, but AGU has more knocks against it: It’s not No. 1 or No. 2 in its industry; it has missed Wall Street estimates in two of the past four quarters; there’s little or no sales or profit growth on the horizon; and it has a long-term growth rate of only 5%.
Bottom Line: Yes, Agrium treats shareholders right with a decent 3.5% dividend, but that’s not enough to make up for the far-below-average growth rate — and better opportunities elsewhere.