Improved sales of seeds and fertilizers offset lower selling prices and led to a 0.9% revenue bump for one of our top recommendations.

Recent acquisitions have helped expand retail operations and software tool offerings and add cash flow to support increased future dividends.

The stock trades at 32.3 times the company’s earnings forecast.

NUTRIEN LTD. (Toronto symbol NTR; www.nutrien.com) is the world’s largest producer of agricultural fertilizers: it ships about 25 million tones annually.

The company took its current form on January 1, 2018, when Agrium Inc. (old symbol AGU) merged with rival fertilizer producer Potash Corp. of Saskatchewan (old symbol POT).

Potash Corp. shareholders received 0.40 shares in Nutrien for each POT share they held; Agrium investors received 2.23 shares for each AGU share.

Nutrien has four businesses: Retail (66% of 2019 revenue) sells seeds, fertilizers and agricultural products to farmers through over 2,000 stores in North America, South America and Australia; Potash (14%) produces potash fertilizer from mines in Saskatchewan; Nitrogen (13%) makes nitrogen-based fertilizers from natural gas at facilities in Canada, the U.S. and Trinidad; and Phosphate (7%) is North America’s second-largest producer of phosphate fertilizer.

The company’s overall revenue rose 2.0%, to $20.02 billion in 2019 from $19.64 billion in 2018 (all amounts except share price and market cap in U.S. dollars).

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That revenue gain was mainly due to the September 2019 purchase of Ruralco Holdings Limited, which sells agricultural products to farmers in Australia through more than 500 retail outlets. Nutrien paid $330 million for that business.

The company also acquired Actagro, which makes specialty soil and plant health products at facilities in Arkansas and California. As well, it completed its acquisition of the final 20% of Brazilian fertilizer producer Agrichem. It now owns 100% of that business. In all, Nutrien paid $581 million for these businesses.

However, earnings before unusual items fell 25.5%, from $1.68 billion in 2018 to $1.27 billion in 2019. Due to fewer shares outstanding, earnings per share declined at a slower rate of 19.0%, from $2.68 to $2.17. That drop is partly due to higher income taxes. However, the company has successfully cut $650 million from its annual costs in the wake of the Agrium-Potash Corp. merger. That’s 30% above its original target.

Mining Stocks: Acquisitions continue despite weak phosphate prices

Nutrien continues to expand its retail operations. In the third quarter of 2020, it purchased Tec Agro Group, which produces soybean seeds for farmers and operates eight retail stores in Brazil. That will increase the company’s retail presence in that country to 25 stores. Nutrien has yet to reveal what it paid for Tec Agro. Still, the new operations will add $200 million to its annual revenue.

The company also continues to see strong demand for its software tools. They let farmers monitor a wide variety of data such as water usage and crop yields. This information helps them better time the planting of seeds and the application of fertilizers.

However, due to weak phosphate fertilizer prices based on a global surplus, the company wrote down the carrying value of its phosphate mines and processing plants in North Carolina and Florida by $823 million.

Due to that write down, Nutrien lost $587 million, or $1.03 a share, in the three months ended September 30, 2020. A year earlier, it earned $141 million, or $0.24 a share. If you factor out unusual items, the company earned $0.23 a share in the latest quarter.

Revenue in the quarter improved 0.9%, to $4.21 billion from $4.17 billion. Higher sales of seeds and fertilizers to farmers through Nutrien’s retail outlets, particularly in Australia, offset lower selling prices for potash, nitrogen and phosphate fertilizers.

In the first nine months of 2020, Nutrien’s free cash flow (regular cash flow less capital expenditures) was $1.63 billion.

That also gives the company plenty of room for dividends.

Nutrien last raised your quarterly dividend with the October 2019 payment. Investors now receive $0.45 U.S. a share, up 4.7% from $0.43 U.S. The new annual rate of $1.80 U.S. yields a high 3.2%. The company’s TSI Dividend Sustainability Rating is Average.

The company has settled a dispute with the Egyptian government over its 26% stake in the state-owned Misr Fertilizers Production Company (MOPCO). This investment contributes between $15 million and $20 million to Nutrien’s annual gross earnings of around $4 billion (all amounts except share price in U.S. dollars).

In 2019, Nutrien sued MOPCO over the cancellation of a marketing agreement.

Under the terms of the settlement, Nutrien will drop all claims and sell its 26% stake in MOPCO to the Egyptian government for $540 million.

The company has not revealed what it plans to do with the cash. However, the funds help offset the $900 million to $1 billion that it spent in 2020 on upgrades to its operations.

Thanks to improving crop prices and lower costs for inputs like natural gas, Nutrien now expects to earn between $1.60 and $1.85 a share for all of 2020. The midpoint of that range—$1.725 a share—is higher than the company’s previous forecast of $1.70. The stock trades at a still-reasonable 32.3 times that new estimate.

Recommendation in The Successful Investor: Nutrien Ltd. is a buy.