Potash Hikes Dividend by 50%


Potash Corporation of Saskatchewan Inc. (POT) announced a 50% hike in its quarterly dividend to 21 cents a share from 14 cents paid earlier. The increased dividend will be paid on November 5, 2012 to shareholders of record as of October 15, 2012.

The dividend increase demonstrates Potash Corp’s confidence in its expansion programs and commitment toward increasing shareholder returns through strategic use of capital.

Potash Corp. is the world's largest crop nutrient company. In July, the company has released its second quarter results for the year. The company’s adjusted (excluding one-time items) earnings of $1.01 per share during the quarter missed the Zacks Consensus Estimate by a penny.

Including one-time items, earnings came in at 60 cents per share compared with 96 cents a year ago. The company incurred a charge of $341 million or 39 cents a share on its investment in Sinofert Holdings Limited and $29 million or 2 cents related to its phosphate segment, which led to a decline in its earnings.

Sales in the quarter came in at $2,396 million, up 3.1% from $2,325 million a year ago, beating the Zacks Consensus Estimate of $2,378 million. The growth was aided by increased potash demand.

The company reduced its 2012 earnings forecast to $2.80–$3.20 per share from its previous expectation of $3.20–$3.60 due to the impact of an impairment charge. Potash expects third quarter earnings to be in the range of 70 cents to 90 cents a share.

The company expects gross profits from its potash business to be in the range of $2.6 billion to $2.8 billion in 2012. It expects production costs to be higher and realizations lower in the second half of 2012.

Potash expects phosphate margins to improve in the second half of 2012, driven by tight global supply and strong demand in the U.S. and Latin America. The company expects combined phosphate and nitrogen gross margin to be in the range of $1.4 billion to $1.6 billion for 2012. Potash also expects capital expenditures (excluding capitalized interest and major repairs and maintenance) to be $2.2 billion for the year.

Potash Corp. competes with BASF SE (BASFY) and Mosaic Co. (MOS). Currently, the company retains a Zacks #3 Rank, reflecting a short-term (1 to 3 months) Hold rating and we have a long-term (more than 6 months) Neutral recommendation on its shares.

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