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Mosaic (NYSE: MOS ) is finally doing what I had been waiting for -- namely, paying out more to shareholders. The company is increasing its annual dividend to $0.50 per share, more than doubling the current $0.20 per share.
While this looks like a good enough reason to give Mosaic serious thought, it's not the only one. A lot of factors make Mosaic a must-watch. Take a look.
Two favoring developments
Canpotex has given Mosaic reason to smile. Mosaic is the second-largest stakeholder in Canpotex, the three-member legal cartel that controls Saskatchewan potash exports, behind PotashCorp (NYSE: POT ) and ahead of Agrium (NYSE: AGU ) . Things looked a little shaky when new orders weren't flowing in for some months. But with Canpotex bagging a 500,000 tonne potash order from China some days back, things are back on track. Such contracts help Mosaic lock in a good portion of its potash sales well in advance.
The U.S. Department of Agriculture's prediction of record corn plantations by U.S. farmers in 2012 is great news, too. If the forecast holds good, Mosaic's business will get a big boost, as corn consumes a lot of nutrients. The company itself is anticipating high demand and ramping up the capacity of potash by a whopping 5 million tonnes and of MicroEssentials (its premium phosphate product) by 2.3 million tonnes. And Mosaic is all charged up about its first feed phosphate product Nexfos that recently got approved.
Two critical litigations resolved
Mosaic scored a coup last month when it resolved an important phosphate mining case. Since 2010, a part of Mosaic's South Fort Meade mine near Florida was inoperative because of a permit issue. Now that a settlement has been reached, Mosaic will be able to run its mine at full capacity and gain access to around 7,000 acres of mining land with viable reserves.
Mosaic also settled a key potash tolling litigation with PotashCorp recently. Mosaic was supplying 1.1 million tonnes of potash at cost from the mine at Esterhazy to PotashCorp every year for the past four decades. Thanks to the settlement, this supply agreement will expire at the end of 2012, enabling Mosaic to sell the 1.1 million tonnes to outside customers. Also, Mosaic will be able to export an additional 1.3 million tonnes via Canpotex. This combined with the Esterhazy expansion should add significantly to Mosiac's potash capacity.
Two standouts: performance and financials
Thanks to soaring fertilizer prices and demand, the last two years have been great for Mosaic. Its top line grew at a compounded rate of 31% while net income surged 89.4% during the same period. But what I like most about Mosaic is its low debt and high cash position.
Mosaic's total debt-to-equity ratio is at 9.2%, and its cash and equivalents stands at $3.2 billion. With operating (earnings before interest and tax) margin at around 24%, Mosaic can further improve its return on equity of 18.2% with higher leverage. Given its solid financial standing, the only thing that used to perturb me was its meager dividend payout. Now that the company has raised its dividend, I have even more reasons to love Mosaic.
The Foolish bottom line
Favoring industry conditions, strong financials, robust top-line growth, great growth plans, and now higher dividends -- what more do we need from a company? I'll soon be telling you more about Mosaic's just-released quarterly report. To make sure you do not miss it, simply click here and add Mosaic to your stock Watchlist.
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