Potash Corp./Saskatchewan (USA) (POT), Mosaic Co (MOS), Intrepid Potash, Inc. (IPI): Is the Potash Industry Doomed?

Like Mosaic Co (NYSE:MOS), Intrepid Potash, Inc. (NYSE:IPI) also under-delivered when it reported its own first-quarter results. Diluted EPS fell 25% versus the first quarter of 2012, due largely to lower potash sales. The company sold 185,000 tons of potash in the first quarter of 2013 versus 203,000 tons in the same quarter last year.

Are dividends and buybacks enough of a cushion?

Potash, with its strong underlying fundamentals and high dividend yield, make it the best-in-breed potash fertilizer company.

With the Uralkali announcement, however, there are now opposing forces at work here, and it’s unclear which side will claim victory over the long term.

Potash is a very cheap stock, and I’m tempted to believe the 20% one-day haircut means the likely damage to Potash’s business is priced in.

At the same time, the company itself will probably revise its earnings guidance for the remainder of the year at some point, which will give investors a clearer picture of what to expect.

After the sell-off, Potash Corp./Saskatchewan (USA) (NYSE:POT)’s dividend yield is now 4.5%, and the company has increased its payout four times in the last seven quarters. Moreover, only one week ago, Potash announced a $2 billion share repurchase authorization to buy back 5% of its outstanding common shares over the next year.

Clearly, there are multiple margins of safety here, which investors can hang their hats on while the company endures this challenge. For those investors not afraid to buy when there’s blood in the streets, Potash certainly looks attractive. I’d wait for the dust to settle a bit, but should Potash continue to sell off, shares are quickly approaching bargain territory.

The article Is the Potash Industry Doomed? originally appeared on Fool.com and is written by Robert Ciura.

Robert Ciura has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Robert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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