Agricultural cooperative CHS (untraded) has just posted a loss for the quarter ended 2/28/2021. A quarterly loss of $38 million in the most recent quarter compares to net income of $125 million in the year ago quarter.
CHS has 5 outstanding issues of preferred stock which have always traded rather strong, because of the perceived quality of the company, although the issues are unrated.
While CHS is an agricultural company, their crude oil refinery business has been ‘carrying’ the company during the last couple of years as ag profits fell dramatically. Unfortunately the energy business has now turned negative for the coop.
I suspect that the company will get it turned around eventually, but for now I am changing my III rating of dividend safety from a B (above average) to a C (average).
The company continues to have strong free cash flow, but I no longer believe the coop is ‘above average’ in dividend safety.