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PotashCorp-Agrium Merger: What It Brings to Dividend Investors




Recent earnings show an unfavorable trend for agricultural chemical (MXI) investors who are particularly interested in dividends as a source of income. The weakening bottom line, as a result of the weak farm economy, made companies evaluate their share repurchase and dividend policies. Recently, PotashCorp (POT) announced that it would cut its quarterly dividend by as much as 60% during its 2Q16 earnings call. Read It’s Do or Die Time for PotashCorp’s Dividend Investors to learn more.

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Yield will likely improve

With the dividend slashed, PotashCorp’s investors would yield 2.5% in forward dividend yields. The combination with Agrium brings another reason for PotashCorp investors to be happy. The company announced that the dividend yield after the merger would remain at Agrium’s level of 3.5%. Mosaic (MOS) has a forward dividend yield of 4.4%, while CF Industries (CF) has a forward yield of ~5%.

The company stated that the combination will provide “significant protection to sustaining capital and dividends, even in the bottom of the cycle.” Keep in mind that PotashCorp’s cut in the dividend has been announced as a result of the bottom cycle.

The PotashCorp (POT) and Agrium (AGU) merger is expected to close by mid-2017. However, for this deal to come to fruition, two-thirds of both companies’ shareholders must vote in favor of the merger. Also, both companies need to overcome regulatory hurdles.

Both companies’ CEOs will be holding a joint investor conference on September 22. We’ll cover the event as it happens.


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