Kevin Simpson has added CF Industries to his dividend income portfolio, aligning with his long-term investment theme: the reindustrialization of America and the return of critical supply chains to the U.S.
This 80-year-old company, located just outside of Chicago, is one of the world's largest producers of ammonia, which it converts into nitrogen products primarily used as fertilizers.
Key Points
- CF is one of the industry's lowest-cost nitrogen producers at a time when global supply is tight.
- Washington wants more fertilizer made at home.
- Strong free cash flow supports a growing dividend.
- Nitrogen is essential to modern agriculture.
Simpson notes that CF Industries is appealing because it produces something the world cannot easily do without, especially with global conflicts disrupting trade routes.
Why I'm Buying
CF's major advantage is its low-cost North American production base.
Producing nitrogen fertilizer requires large amounts of natural gas, and CF benefits from the region's relatively inexpensive supply.
The U.S. wants more fertilizer made at home, and the administration is investing $500 million to increase production.
Why Now?
CF's shares are up more than 60% for the year but have remained flat over the last six months.
During that period, the valuation became more attractive as earnings boomed while the price stayed the same.
This stock checks a lot of boxes: reindustrialization, supply chain security, strong free cash flow, and a very attractive valuation.
