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Is Mosaic’s Dividend Yield Good for Income Investors?

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Dividends

As of February 11, 2016, Mosaic (MOS) paid a quarterly dividend of $0.28 per share. In the past four quarters, it paid an annual dividend per share of $1.10, which has grown at a compounded annual growth rate of about 3.2% over the past three years.

Over the same period, Agrium’s (AGU) dividend grew by 12.6% at a compounded annual growth rate over the past three years. However, when considering dividends, it’s more important to look at the company’s dividend yield if you’re an income investor.

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Dividend yield

As you can see in the above graph, Mosaic’s (MOS) dividend yield has risen over the past few years. As of this writing, it stands at 4.7% compared to Agrium’s (AGU) yield of 4%. Even though Agrium has a higher dividend amount in terms of dollars, Mosaic has a better yield. This essentially means that you’ll get 4.6% return on $100 invested in Mosaic compared to 4% for investing $100 in Agrium.

But with a shaky commodity pricing environment, investors often ask about the sustainability of the dividend yield. Fertilizer prices play a key role in a company’s dividend policy. A weak pricing outlook affects dividend policy. Recently, Potash Corporation (POT), which had one of the highest dividend yields of ~10% compared to 3.9% for CF Industries (CF), slashed its dividends in anticipation of a weakness in fertilizer prices.

Some of these companies can also be accessed through the Materials Select Sector SPDR ETF (XLB), which invests 12% of its portfolio in agricultural chemicals.

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