Tuesday, July 30, 2013

Welcome Aboard Potash Corp!

Last month I pulled the trigger during the noticeable market correction and I thought I’d share with you what I recently purchased.

PotashCorp is the world’s largest fertilizer company by capacity, producing the three primary crop nutrients: potash (K), phosphate (P) and nitrogen (N).

As the world’s leading potash producer, we are responsible for approximately 20 percent of global capacity through our Canadian operations. To enhance our global footprint, we also have investments in other key global potash-related businesses in South America, the Middle East and Asia.


With operations and business interests in seven countries, PotashCorp is an international enterprise and a key player in the growing challenge to feed the world. (Taken from http://www.potashcorp.com/about/overview/)

POT has been paying a dividend since 1990 but I just wasn’t in love with it’s dividend payout. Lately it’s been increasing the dividend like crazy and I bought in at a 3.5% yield. The price is a few dollars lower today, but I’m happy with my 3.5% yield on cost. If they continue with the nice dividend increases, that yield will increase over time and that’s what I’m banking on.

Since POT does not have the dividend history I normally look for, this investment was a slight gamble when compared to my other investments but I’m not too worried. I always wondered how much potash was available in Saskatchewan and when I found out they had at least a 200 year supply for the current worlds demand,  my mind was at ease. With a dividend payout ratio of 61.4%, I don’t think the dividend will be cut anytime soon. The world always needs fertilizer, especially when the Canadian Parliament is out of session!

Looking at POT’s long term chart below, we can see that it might not be perfect, but I see a excellent time to get in while the getting’s good. As long the dividend keeps increasing, the chart could look like a roller coaster for all I care!
potash

What, Me Worry?

I know I don’t give a very detailed stock analysis and it’s for a good reason; I’m not a financial analyst! I don’t think investing has to be as complicated as everyone makes it out to be. I have a great strategy that works very well and I even have a warning system to get out of an investment without losing my shirt. As long as a company maintains the dividend, all is well. When a company announces a dividend cut, I sell my position and invest that capital elsewhere. I don’t think it can be any simpler then that!

 I have enough to deal with in real life then to make things more complicated with investing. As the dividends come in, I know first hand that my investments are indeed working as intended; for me! I know I won’t be breaking any investment records with this strategy but I really don’t care. As my yield on cost grows to double digit returns, I couldn’t ask for a better investment strategy. Only time will tell if the dividends will last and unless the entire world economy collapses, then I think it’s a safe bet that they will. Until then I’ll keep counting my dividends and enjoying my spare time.

This article was written by The Loonie Bin. If you enjoyed this article, please consider subscribing to his feed.

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