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Potash raised to Buy at UBS on strong dividend, cash flow outlook

Dec. 19, 2014 2:54 PM ETNutrien Ltd. (NTR) Stock, NTR:CA StockMOS, IPI, NTRBy: Carl Surran, SA News Editor1 Comment
  • Potash (POT +1.9%) is upgraded to Buy from Neutral with a $40 price target, up from $38, at UBS, citing the company's strong dividend and improving free cash flow.
  • UBS says the planned closure of Mosaic's Carlsbad operations in Jan. 2015 and the current flood at Uralkali's Solikamsk-2 mine could remove 2.4M -3.4M metric tons of combined capacity from the market and provides an opportunity for POT to gain more volumes, which also could lead to higher pricing.
  • POT’s dividend yields ~4%, and UBS believes it provides downside protection given that the dividend can be funded even if potash prices remain flat; the firm thinks that over time POT may be able to return excess cash to shareholders through an increased dividend or further share repurchases.
  • Other potash producers are higher: MOS +2%, AGU +0.4%, IPI +2.6%.

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