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Potash Stocks to Watch for 2022

If inflation continues to rise or stays elevated, potash stocks may have a great year in 2022. Read on for more on potash stocks.
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This article was originally published by Investment U

You’ve probably noticed that your grocery bill is going higher with every trip to the grocery store. Your growing bill is, in part, due to higher potash prices. Potash is used in the fertilizer that farmers around the world use to grow the corn, bean and wheat that go into our food supply. Potash stocks have jumped accordingly.

Yes, food companies use a lot of oil and gas to process our food, but potash stock companies grow the food. Since the conflict between Russia and Ukraine started, countries worldwide have sanctioned oil and gas coming out of Russia. Since Russia is one of the world’s largest oil and gas suppliers, the supply has dried up drastically. However, demand for oil and gas has remained as high as ever.

The supply and demand imbalance has caused oil and gas prices to skyrocket. Because companies and households use oil and gas daily, the inflation caused by rising prices has pushed up inflation to painful levels. Higher food prices are adding to the pain.

Potash stocks use plenty of oil and gas to make the fertilizer they sell to farmers. As potash stocks pass their higher costs on to farmers, they pass along higher prices to food processors. Eventually, inflation trickles down to food consumers.

Observant investors may be able to take advantage of the situation. If inflation continues to rise or stays elevated, potash stocks may have a great year in 2022. Read on for more on potash stocks.

Potash Stock List 2022

Potash stocks don’t usually garner headlines like big tech stocks, but that doesn’t mean they can’t be a great investment. If you’re interested in learning more about potash stocks, start by checking out my list below.

Stocks have stunk this year. For instance, the S&P 500 stock index is down nearly 19% year-to-date. Although the tech-heavy Nasdaq stock index had great years in 2020 and 2021, it is down over 26% this year. Many potash stocks on this list have outperformed broader stock indexes in 2022. Keep reading for more info on potash stocks.

No. 5 Nutrien (NYST: NTR)

NTR is based in Canada and was formed in 2018 by a merger between PotashCorp and Agrium. It is the largest producer of potash in the world. In addition to its potash business, Nutrien is one of the world’s top five producers of nitrogen fertilizer. Being a global fertilizer producer, the company’s distribution network is massive. Its network includes more than 2,000 retail locations and 440 wholesale distribution points around the globe.

In its recent slide deck, Nutrien spelled out plans to increase worker safety and decrease costs at the same time. Its plans include autonomous mining, supporting production ramp-up, and taking miners out of hazardous conditions.

Nutrien stock is flat for the year, which is still better than the S&P 500 stock index. Additionally, the stock does not pay a dividend.

No. 4 Intrepid Potash (NYSE: IPI)

IPI is the only U.S.-based producer of Potash. According to its most recent annual report, the company sells its potash in three main markets: the agricultural market as a fertilizer input, the industrial market as a component in drilling and fracturing fluids for oil and gas wells, and an input to other industrial processes, and the animal feed market as a nutrient supplement.

The company sells its specialty fertilizer under the Trio brand. Trio delivers potassium, sulfate, and magnesium in a single particle with low chloride. The combination makes it a favorite option across a diverse range of crops and geographies. Intrepid Potash produces Trio from its mine in Carlsbad, New Mexico.

Intrepid Potash stock nearly tripled from the beginning of the year to April. Since then, the stock has come down. It now trades at a P/E ratio of 2x.

The two stocks listed below are two potash stocks that pay a dividend. These stocks could also benefit from elevated potash prices.

No. 3 The Mosaic Company (NYSE: MOS)

MOS is one of the largest potash stocks on the list. It is a Fortune 500 company with a market cap of over $16 billion. In its first-quarter earnings report, the company noted that it had a free cash flow of $466 million and returned $463 million to shareholders in the form of share repurchases and dividends.

The earnings report also said that reduced global potash supply would mean some demand goes unmet. The situation should provide a catchup demand tailwind over the medium term. The supply and demand imbalance has caused potash prices to steadily increase since January 2021.

Year-to-date, Mosaic’s stock is up 12.5% and pays a modest dividend yield of 1.3%. In addition, the stock trades at a P/E ratio of 6.4x.

No. 2 ICL Group (NYSE: ICL)

ICL was founded in 1929 and is now the world’s sixth-largest potash producer. The company’s three main markets are agriculture, food, and industrial. With the run-up in potash prices, the company reported that its potash sales were up a whopping 128% in the first quarter. On top of that, EBITDA (earnings before interest, taxes, depreciation and amortization) from its potash business was up 626% for the quarter.

ICL Group’s stock is down 6.4% this year. In its first-quarter earnings report, the company said the stock paid a dividend yield of 6.1%.

Bonus: One Potash Stock that May Also Produce Lithium

According to its first-quarter earnings report, Compass Minerals International (NYSE: CMP) is the largest producer of sulfate of potash in the Western Hemisphere. The company’s main markets are agriculture and culinary. In addition to sulfate of potash, the company produces salt.

During its salt production, Compass removed lithium for further processing. Once its lithium production is scaled, it can be used to make lithium-ion batteries for electric cars. Compass stock has had a rough year in 2022. The stock is down over 38%, but it pays a dividend yield of nearly 2%.

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