Covered seven times over by free cash flow, with almost no net debt and a rising rate. CF Industries pays $0.60 a quarter, $2.40 annualized, raised 20% in August 2026 from $0.50, with raises in 2022 and 2024 before that and no cut in ten years. Dividends of $311 million are 14% of 2025 free cash flow of $2,258 million, a pass, and net debt is 0.2x EBITDA, a pass. No caution applies on any check, so the card grades good; the risk is nitrogen pricing, not coverage.
Key risk: Nitrogen prices drive earnings: a sharp fall in urea prices cuts cash flow far faster than it cuts the dividend, and the payout would follow within a year or two.
Changes if: Free-cash-flow payout crosses 60%, leverage passes 3x, or the raise streak breaks.
- ✓Cash-flow cover 13.8% of FY2025 free cash flow, pass (<60%).
- ✓Leverage 0.2x net debt/EBITDA, pass (<3x).
- ✓Dividend history Raised in 2022, 2024 and August 2026; no cut in 10 years.
- ✓Trap screen Yield 1.75%, payout under 100%, no cut; not a trap pattern.
What this grade doesn't say: It screens the dividend only — covered, real, compounding. It says nothing about valuation or price: a well-covered payer can still be overpriced, and its price can still fall.