Fertilizer Giant CF Industries (CF) Hits All-Time High for Three Different Reasons

Michael Teague  |

CF Industries Holdings Inc. (CF) , the third-largest agricultural chemicals company by market share at $12.27 billion, treated shareholders to a number of promising announcements on Wednesday to the delight of investors, who by midday trading had sent the stock up almost 10 percent in response.

One of the main catalysts for the price movement came in the form of company filings with the Securities and Exchange Commission that indicated CF expects an increase in cash flow going forward, and that it was considering returning some of this to shareholders by means of a dividend hike. The company currently pays an annual dividend of $4.00, representing a yield of 1.87 percent.

CF Industries also got a boost from analysts at RBC Capital Markets who initiated coverage on the stock with a rating of “sector perform” with a price target of $235 per share. The RBC analysts were fairly optimistic in a note, saying "CF is considered a North American nitrogen pure play with leading leverage to the U.S. agriculture market, particularly corn, and a significant nitrogen capacity expansion under way,".

Still others pegged the stock’s jump on the disclosure, through an 8-K filing, that the nitrogen-based fertilizer producer was mulling over various financing options, including a Master Limited Partnership that can provide more favorable tax and liquidity environments for a materials companies.

Shares for CF hit a new all-time high early in the morning at $237.30 before paring back slightly to just under $235 per. The company has made modest gains in 2013, advancing just over 6 percent, but has added 12 percent over the current period.

While all three of these events played a role in CF’s impressive gains, the possibility of a dividend hike is significant in that it seems to be a response to pressure from Dan Loeb’s Third Point LLC to raise its dividend. The news on Wednesday comes on the heels of a 150 percent dividend increase announced in October.

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