AGRIUM INC. $102 - Toronto symbol AGU

AGRIUM INC. $102 (Toronto symbol AGU; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 158.0 million; Market cap: $16.1 billion; Price-to-sales ratio: 1.0; Dividend yield: 1.0%; TSINetwork Rating: Average; www.agrium.com) has gained 30% since May 2012. That’s partly due to pressure from activist investor Jana Partners LLC, which owns roughly 4% of Agrium’s stock.

Jana wants Agrium to spin off its retail business as a separate company. This division has 872 stores in North America, South America and Australia that sell seed, fertilizer and other products to farmers. They also supply two-thirds of Agrium’s revenue and half of its earnings.

Jana feels the spinoff, combined with cost cuts at the retail division, could potentially unlock $50 a share of value. Agrium disputes these figures and feels that the steady revenue streams from the retail business cut its exposure to volatile fertilizer prices, as well as its overall risk.

As well, partly in response to Jana’s demands, Agrium is spending $900 million to repurchase 6% of its shares. Share buybacks raise earnings per share and other per-share calculations, and give the remaining shareholders a larger stake in the company.

Agrium has also increased its dividend twice in the past year. The current annual rate of $1.00 U.S. a share yields 1.0%.

Agrium is a buy.

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Jim Bates

Jim is an associate editor at TSI Network. He is the lead reporter and analyst for The Successful Investor and Wall Street Stock Forecaster and a member of the Investment Planning Committee. Jim has held the Chartered Financial Analyst designation since 1992 and spent more than a decade at the Financial Post DataGroup before joining TSI Network. He has a Bachelor of Commerce degree from the University of Toronto.

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