This is an analysis completed by The Dividend Guy. It is not to be used as investment advice or a recommendation to buy, hold, or sell any stocks discussed. Please ensure you complete your own analysis.
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Having lived in Saskatchewan when I was a young lad, I heard about this huge company called Potash Corp. My family even had friends who worked there so I remember vividly going to one of their locations and seeing the mountains of this white snow-like stuff all over the place. That was potash. I had no idea this stuff was used since antiquity in the manufacture of glass and soap and as a fertilizer. In reading over at the Investors Business Digest, I noticed that it was number four on their list of top 100 stocks. As you will see the EPS and revenue performance of this stock is nothing short of spectacular. I thought I would have a look at it to see how it looks as an investment given my criteria.
The Company: Potash Corp. (POT-NYSE)
The Company is a fertilizer enterprise producing the three primary plant nutrients: nitrogen, phosphate and, potash. The company supplies to three distinct market categories: agriculture, animal nutrition, and industrial chemicals.
| No | |
| No |
THE FUNDAMENTALS
Revenue
Click to EnlargeRevenue Scoring
| Criteria | Scoring |
| Consistenly Up with No Down Years | 1.0 |
| Up Trend with Less Than 2 Down Years | 0.5 |
| Choppy with Greater Than 2 Down Years | 0.0 |
| My Revenue Score | 0.0 |
Earnings Per Share
Click to EnlargeEarnings Per Share Scoring
| Criteria | Scoring |
| Consistenly Up with No Down Years | 1.0 |
| Up Trend with Less Than 2 Down Years | 0.5 |
| Choppy with Greater Than 2 Down Years | 0.0 |
| My EPS Score | 0.0 |
TOTAL FUNDAMENTALS SCORE: 0.0
THE RATIOS
Return on Equity
Click to EnlargeReturn on Equity Scoring
| Criteria | Scoring |
| Above 15% for Last 5 Years | 1.0 |
| At Least One Year Below 15% in Last 5 Years | 0.0 |
| My ROE Score | 0.0 |
Other Ratios
| Ratio | Criteria | Value | Score (Pass=1 / Fail = 0) |
| Debt to Equity | Less Than 0.50 | 0.24 | 1.0 |
| Payout Ratio | Less Than 60% | 9% | 1.0 |
| Credit Rating | BBB+ | BBB+ | 1.0 |
| Total Ratio Score | 3.0 |
TOTAL RATIOS SCORE: 3.0
DIVIDEND DATA
Annual Dividends
Click to EnlargeDividend Scoring
| Criteria | Scoring |
| 25+ Years of Dividend Growth | 1.0 |
| 10+ Years of Dividend Growth | 1.0 |
| Less Than 10 Years of Dividend Growth | 0.0 |
| My Dividend Growth Score | 0.0 |
TOTAL DIVIDEND GROWTH SCORE: 0.0
STOCK VALUATION
| Valuation Metric | Criteria | Value | Score (Pass=1 / Fail = 0) |
| Dividend Yield | Cur Yld Greater Than 10 Yr Avg Yld | 1.3% | 0.0 |
| Div Yld Compared to SPY Div Yld | Cur Yld Greater Than SPY Yld | 2.4% | 0.0 |
| P/E Ratio | Cur P/E Less Than 10 Yr Avg P/E | 28.5 | 0.0 |
| Relative P/E | Relative P/E Less Than 1.0 | 1.56 | 0.0 |
| Price to Sales | Less Than 1.5 | 10.3 | 0.0 |
| Total Ratio Valuation Score | 0.0 |
Canadian Shareowner’s Association Stock Selection Guide Software Buy Price
| Buy Zone |
Maybe Zone |
Sell Zone |
Current Price | Rating | Scoring (Buy=1.0, Other=0.0) |
| 0.0 |
TOTAL STOCK VALUATION SCORE: 0.0
SUMMARY
Points Earned:
3 out of 14 – half points are rounded down to be conservative
The stock is rated LOW with 3 points earned through my analysis of the stock. This stock has seen some spectacular growth in the past couple of years. In fact, the EPS growth rate in the most recent year over year comparison is 86.9% compared to the 10 year average of only 12.9. This company has managed to drastically improve performance as well as sales, which are up 39% in the most recent year. However, if we look back more long term the results are not consistent. Both sales and EPS have gone up and down in the past. Dividend growth has also been slow – they have obviously been plowing money back into the company to continue growth. From my perspective, I will not be buying this stock. I will want to see a couple of extra years of strong performance. If the company drops the ball and growth slows, then I believe investors will be quick to scold the company and the share price.
| Rating | Points Required |
| High | 11+ points |
| Medium | 8-10 points |
| Low | < 8 points |
Reminder: This is an analysis completed by The Dividend Guy. It is not to be used as investment advice or a recommendation to buy, hold, or sell any stocks discussed. Please ensure you complete your own analysis.
The Dividend Guy does not own shares in TGT
I am confused with this visual chart, and would like education according:
Dividend Scoring
Criteria Scoring
25+ Years of Dividend Growth 1.0
10+ Years of Dividend Growth 1.0
Less Than 10 Years of Dividend Growth 0.0
My Dividend Growth Score 0.0
TOTAL DIVIDEND GROWTH SCORE: 0.0
In reading this chart it would appear that if 1 is pass/ 0 is fail, I should expect the TOTAL DIVIDEND GROWTH SCORE: to be 2 instead of 0. Would you please explain what I am missing when you calculate to a 0.0 score?
Hi Patty,
Thanks for the question – this is probably not as clear as it should be. The way I score for the dividends is a little different from some of the other metrics. In this case, the company gets 1 point each for being in the 25+ and the 10+ camp – for a possible 2 points. If the dividend increase is not consistent then it gets zero.
What the chart is showing is how I actually score it – not that the company has earned 1 point for each. In this case, Potash has not increased dividends consistently so I have given them a zero. Had they had 25 years they would have received the 2 points. Is that more clear – let me know.
The Dividend Guy
This posting is ancient history – many moons have come and gone since the per share price of this company was above $135.00.
Today on June 7, 2010 with the share price of POT threatening to dip
below $100.00 CDN, a 10 cent per per share quarterly dividend, is not something about which to write home to Moma about – unless you
happen to be one who is all smiles with a 0.4% annual yield on your
money. Good luck and happy investing !