Compass Minerals International, Inc. (NYSE:CMP) is often listed as a miner, but the salt and fertilizer it produces are a bit different than what most investors think of when they hear the word "miner." That makes Compass something of an odd duck and results in it being off of most investors' radar screens. A tough 2017 is another net negative. That's a shame, since the stock currently sports a yield of more than 4.4%, and the business outlook is improving. Here's what investors are missing out on with this high-yield stock.

A tough year

Compass Minerals had a 14-year streak of dividend increases going until 2017 came around. Although it still has time to keep that streak alive, don't hold your breath, because it doesn't look likely at this point that the miner will up the dividend in 2018. That's because it got hit hard on multiple fronts last year.

A man standing at the mouth of a mine with the sun behind him

Image source: Getty Images.

Although full-year 2017 sales were up almost 20%, adjusted operating earnings fell nearly 12% on a 4.4-percentage-point drop in operating margins. The big top-line gain was driven by the late-2016 completion of a two-step acquisition that created the company's Latin American fertilizer segment. So 2017 was the first full year of revenue from that purchase. The relatively weak margin and earnings performance, meanwhile, were driven largely by weakness in the company's salt business (around 55% of revenues).

Revenues in the salt division fell 5%, and operating margins declined 6.5 percentage points. Subdued demand led to lower production levels, which increased costs. The company also had to deal with rising shipping expenses. It wasn't a great year, and after long-term debt increased by 65% in 2016 following the completion of the South American business acquisition, Compass chose not to increase the dividend at the start of 2018, when it historically would have done so.

That was then, this is now

It's no wonder that investors were down on the stock as 2018 got underway. In fact, it got even worse after a strike was announced at a key U.S. mine in late April. That said, the future doesn't look as bad as the recent past.

CMP Chart

CMP data by YCharts.

For starters, the strike has been settled, taking a big piece of bad news out of the picture. In addition, salt is a highly seasonal business. The weakness on the salt side of the business in late 2017 was made up in early 2018, with salt sales up 15% year over year in the first quarter and 11% in the second quarter. And while the strike had a negative impact on margins and sales prices were a little weak, management continues to hold to its full-year outlook, suggesting a material increase in margins in the second half of the year as customers stock up ahead of next winter.

That outlook is buttressed by an around 15% increase in salt prices leading into the 2018/2019 winter season. To be fair, the impact of the strike will limit the company's ability to fully benefit from the price increase, but higher pricing is a clear positive over the previous year.

All of this coupled with solid, though hardly spectacular, results in the company's fertilizer business suggests a brighter future ahead. The U.S. fertilizer segment's expansion efforts led to higher noncash depreciation costs crimping reported results despite improving the outlook for the business over the long term -- EBITDA was actually up by 6% year over year in the second quarter. Currency headwinds in the Latin American business, meanwhile, led to an earnings decline in that segment, but once again, EBITDA was up roughly 4.5% in the second quarter.

CMP Financial Debt to EBITDA (TTM) Chart

CMP Financial Debt to EBITDA (TTM) data by YCharts.

The only lingering issue is the leverage Compass took on to expand in Latin America. However, the company reduced long-term debt by roughly 5.5% in the first half of the year, so it is clearly working to strengthen its balance sheet. With long-term debt at a hefty 70% of the capital structure, leverage still needs close monitoring, but that appears to be a worthwhile trade-off for investors willing to stomach a little uncertainty at a company with a notable yield and an improving business outlook.

Worth a deep dive

Compass isn't an appropriate stock for risk-averse investors. But based on improving conditions at the company and in the markets it serves, it could be a nice fit for more aggressive investors. You will need to watch the company's debt level, but management is clearly aware of the issue, and the improving picture in the company's salt business suggests the next 6 to 12 months will witness a notable bottom-line improvement. And you can collect a nice yield while you wait for this story to play out.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.