This Canadian Agricultural Giant Is a Must-Have Stock If You Want to Retire Rich

Load up on shares of the Canadian agricultural Nutrien Ltd (TSX:NTR)(NYSE:NTR) as it realizes significant post-M&A synergies and accelerates its global growth.

| More on:

Investors are used to Canadian companies having a tough time finding success in a world dominated by deeply entrenched U.S. titans. For every Canadian success story, there are at least two dozen in the U.S., which can sometimes be disheartening for patriotic Canadians who bleed maple syrup.

However, every now and then, we find a company that overshadows its U.S. and European counterparts to blaze a new trail and lead so that others around the world may follow.

The stock and the play

One of those rare examples is Nutrien (TSX:NTR)(NYSE:NTR), a global leader in agriculture solutions with the goal of feeding the future. Well, that’s a good thing because the global population in 2030 will reach almost nine billion people — and they will need to be fed.

For those Fools who are familiar with my investing style, I like to find companies that are aligned to global macro-trends with a unique proposition that solves the biggest problems facing humanity. A recent example of that was my view on the clean energy trend and how to play it profitably.

Nutrien aims to lead the food industry in innovation and bold new thinking with agricultural nutrients and solutions to grow a better world.

While it may not be apparent to many Canadians who shop at grocery stores brimming with fresh produce, the world is under-nourished and there is a significant increase in demand for food.

According to the Food and Agricultural Organization of the United Nations, more than 820 million globally suffer from chronic hunger; the cost of malnutrition in the U.S. alone is $3.5 trillion.

Fixing the world’s nutrition problem is in Nutrien’s wheelhouse, which is why I am ultra bullish on it as a long-term investment.

Nutrien takes advantage of the whole “food chain”

Nutrien starts with the basic building blocks of good crop nutrition: Potash, Nitrogen, and Phosphate. These nutrients are essential to crop growth and Nutrien is a top producer for two of the three.

It’s the world’s largest Potash producer and the third-largest Nitrogen producer.

This scale alone is a big advantage, but Nutrien doesn’t stop there. It then moves to seeds solutions, which is a fancy way of saying that it carries all seed brands that growers would ever be interested in, including proprietary seed breeding capabilities in crops the world is demanding more of, like canola, rice, and cotton.

In short, Nutrien has built core expertise and scale in the entire food growing supply chain and is now indispensable to the global food industry. Smart investors always invest in companies that are needed to solve big problems like world hunger and nutritional deficiency.

The financial firepower to back up the food expertise

Nutrien isn’t just a collection of smart people wanting to solve the world’s food problems. Rather, the company has also built solid financials and a strategic road map to appeal to the most discerning of long-term value investors.

The company posted $3.9 billion in EBITDA for 2018 and management expects EBITDA to grow to almost $7 billion at the high end over the next five years as of 2023.

In addition, Nutrien also plans to drive shareholder value over the next few years by accretive M&A activity, margin expansion and improving working capital and technology. In short, the company has a lot of levers it can pull to continue to drive EBITDA growth.

The final verdict

Nutrien is a cash powerhouse with a price to cash flow (P/CF) ratio of about 12 and a forward-looking price to earnings (P/E) ratio of about 15. These multiples and a stock price of around $66 at the time of writing means that investors may not be getting a huge bargain-basement stock price here.

But then again, you never expect a fire sale for genuine Gucci handbags either. The point is that sometimes you have to pay up for high-quality stocks and this stock is the real deal with the scale and ability to grow cash flow and dividends reliably well into the future.

Smart investors who have their eye on the long game can start nibbling on Nutrien at these levels and slowly accumulating a position on stock price dips. Before you know it, you will have built up a nice position setting you up for a happy retirement.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Rahim Bhayani has no position in any of the stocks mentioned. Nutrien Ltd. is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

profit rises over time
Dividend Stocks

These 2 Dow Stocks Are Set to Soar in 2025 and Beyond

Two Dow Jones stocks are screaming buys but Canadians must hold them in an RRSP or RRIF to avoid paying…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

How to Use Your TFSA to Earn Ultimate Passive Income

If you have a TFSA, then you have the key to creating ultimate passive income. All you need is a…

Read more »

Confused person shrugging
Dividend Stocks

Better Buy: Fortis Stock or Hydro One Stock?

Let's do a compare and contrast of these two top utilities stocks right now, shall we?

Read more »

A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."
Dividend Stocks

Boost Your Passive Income: 2 Canadian High-Yielders at a Bargain

Nutrien (TSX:NTR) stock and another play that appear like fantastic dividend bargains in mid-November.

Read more »

3 colorful arrows racing straight up on a black background.
Dividend Stocks

TSX Stocks Soaring Higher With No Signs of Slowing

Three TSX stocks continue to beat the market and could soar higher in an improving investment landscape.

Read more »

Hourglass and stock price chart
Dividend Stocks

Goeasy Stock: Is It Heading for a 52-Week High?

Goeasy stock has been edging higher, especially after another record-setting earnings report. So are 52-week highs in sight?

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Dividend Stocks

Here’s the Average TFSA Balance at Age 44 in Canada

You can invest your TFSA in funds like the BMO Canadian High Yield Dividend ETF (TSX:ZDV) to grow the balance.

Read more »

Electricity transmission towers with orange glowing wires against night sky
Dividend Stocks

The Best Telecom Stock to Buy Before 2025

Choosing the safest stock from a decimated sector can be tricky, but if there is a reasonable chance of full…

Read more »