Potash Corp. of Saskatchewan Inc., the largest supplier of its namesake fertilizer in North America, fell the most in more than two years after analysts at JPMorgan Chase & Co. said lower nutrient prices probably will prompt management to cut payments to shareholders.
Potash Corp. fell 7.8 percent to $14.84 in New York, the largest decline since July 2013.
The company last week announced an indefinite suspension of operations at its new mine at Picadilly in New Brunswick, Canada, to help reduce a global oversupply that has seen potash prices slump. Additionally, prices are falling for nitrogen- based fertilizers such as urea, something the company also produces. That increases the probability Potash Corp. will reduce its annual dividend to $1 from $1.52 currently, JPMorgan analysts led by Jeffrey Zekauskas said in a note Monday.
"Our base case is that Potash Corp. will reduce it because the dividend was set during a period of cyclical strength and a higher level of earnings and industry structure conditions that does not resemble today's business landscape," Zekauskas said. "The dividend yield would move from almost 10 percent to 6 percent under our assumptions."
He also cut his rating on Potash Corp. shares to neutral from overweight, the equivalent of buy.
A Potash spokesman didn't return a call seeking comment. Chief Executive Officer Jochen Tilk told investors at a conference on Jan. 21 that the company's board will discuss the dividend when it meets this week. Potash Corp. reports fourth- quarter earnings on Jan. 28.
Jonas Oxgaard, an analyst at Sanford C. Bernstein & Co. who recommends buying the shares, also expects the dividend will be reduced, he said in a note Monday.
"The fear of Potash Corp. going into financial distress and having bigger problems than paying dividends likely outweighs any reward the company is getting from the dividend at this stage," Oxgaard said.