As a group, dividend stocks have underperformed the broader equities market by a considerable margin this year. With artificial intelligence (AI) stocks delivering exponential share price returns, and yields on 10-year Treasury notes surging north of 5%, even the highest-yielding dividend stocks have found it difficult to capture investors' attention in 2023.

That said, there are now some bargains worth scooping up among dividend stocks - and Wall Street analysts have recently grown notably more bullish toward at least one of these deeply discounted dividend-paying names in recent weeks.

About Mosaic

Founded in 2004,  agrichemical specialist Mosaic Company (MOS) was formed through the merger of fertilizer company IMC Global and Cargill's crop nutrition division. Mosaic is now a leading producer and marketer of concentrated phosphate and potash crop nutrients, essential for agricultural production worldwide. Notably, it is the largest U.S. producer of potash and phosphate fertilizer, and commands a market cap of $11.73 billion.

Mosaic stock is down 17.5% on a YTD basis, compared to a gain of 20% for the S&P 500 Index ($SPX).

MOS Stock: A High-Yield Bargain

Mosaic currently offers a dividend yield of 3.62%, with the cash dividend of $0.20 payable quarterly. Further, Mosaic has been increasing its dividends consistently over the past five years with a 5-year growth rate of 51.57% - and with a dividend payout ratio of less than 20% (17.39%), MOS has room to keep growing its dividend in the future.

The company also repurchased over $450 billion in shares through the first half of the year, returning over 100% of free cash flow to shareholders in the process.

Along with the attractive dividend yield, Mosaic is also quite reasonably valued after its 2023 pullback. The stock is priced at 9.5x adjusted forward EPS, and 0.85x forward sales - both comfortably below the sector median readings for materials stocks. 

Plus, forward price/book is 0.97, compared to the sector median of 1.87. 

MOS Beats on Top Line, Despite Tough Comps

Mosaic faced tough earnings comparisons this year, as fertilizer prices cooled significantly from the highs reached during the Russia-Ukraine conflict in 2022. In Q3 2023, Mosaic's revenues came in at $3.55 billion, down 34% from the prior year - but still ahead of consensus estimates. EPS of $0.68 fell 79% yearly, and missed the average analyst forecast.

The company's liquidity position remained healthy, with a cash balance of $591 million at the end of the quarter, almost double its short-term debt levels of $300 million. Meanwhile, the company's generation of net cash from operating activities ($647.4 million, down 27.2% YoY) and free cash flow ($335 million, down 43% YoY) remained strong.

Looking ahead to 2024, Mosaic announced that Joc O'Rourke is stepping down from his role as CEO, and company veteran Bruce Bodine will succeed him in the top job. This hand-off is expected to provide a smooth transition with no significant interruption to the broader company strategy.

Growth Drivers for Mosaic

Mosaic is aggressively expanding its footprint in Brazil, constructing a distribution facility in the heart of the country's burgeoning agricultural region, Palmeirante, that is expected to come online in 2025. 

The company is also pushing its MicroEssentials product line, which carries a margin premium and offers promising growth potential. 

The lithium iron phosphate (LFP) market could also drive growth going forward. Addressing expected supply constraints in phospates, management noted: “Industrial demand, particularly in China's lithium iron phosphate production, is expected to grow dramatically over the next several years. Last year, LFP production more than doubled to 1.1 million tonnes of finished fertilizer equivalent, and production is expected to grow by an additional 500,000 tonnes in 2023. This new market will continue to take phosphate volumes away from fertilizer production.”

Analysts Finally Turn Bullish

The consensus rating on MOS from Wall Street has been stuck at “Hold” for a while now, but it's finally shifted to a cautiously bullish “Moderate Buy” over the past month. Out of 16 analysts covering the stock, 5 have a “Strong Buy” rating, 10 have a “Hold” rating and 1 has a “Strong Sell” rating - compared to just 3 “Strong Buys” and 2 “Strong Sells” a month ago.

The stock's mean target price from this group is $42.70, which denotes expected upside potential of roughly 21.6% from current levels.