The agriculture industry is stuck in a lengthy and difficult downturn. Agricultural commodities have declined in price over the past year, under a flood of cheap imports, and this has put a big dent in profits across the industry. Sentiment has been negative for a fairly long time, but there are signs that a recovery could finally be within reach.

Fertilizer company CF Industries(CF) - Get Report has seen its stock price plunge by 41% just since the beginning of the year. But this could be a very good buying opportunity for long term investors. (See how long-term investors compound wealth here.)

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The reason is because CF is a low-cost producer, and has maintained profitability throughout the industry downturn.

In addition, thanks to its declining share price, its dividend yield is elevated to 5.2%, making it a quality high-yield dividend stock -- a rarity in today's low yield environment.

If the company can sustain its dividend, which looks likely, CF stock could be a great opportunity for value and dividend investors alike.

Strong Free Cash Flow

CF is a major producer of nitrogen fertilizer. Worldwide prices are declining largely due to global oversupply. Cheap exports from China have suppressed prices, and this has dragged down the entire industry.

Indeed, CF's fundamentals have struggled. Last quarter the company's earnings declined 87%. Earnings-per-share of $0.33 badly missed analyst estimates of $0.68.

However, there were a number of one-time items that artificially depressed CF's results. These include a $150 million payment to OCI (OCINF) after the cancellation of the pending merger between the two companies.

Focusing on the core business reveals a much better result.

CF is one of the lowest-cost producers in the nitrogen fertilizer industry. Over the first six months of the year, the company still generated a 35% gross margin, even though the average selling price per product ton of ammonia and ammonium nitrate are down 30% and 24%, respectively, in the first half of 2016.

Going forward, it is likely the company will be able to increase earnings and cash flow, even though the global pricing environment is not expected to improve until the back half of 2017.

That is because CF is about to finish its major expansion projects in the U.S., which have cost billions of dollars. For example, CF incurred $2.5 billion of capital spending in 2015, mostly due to its expansion projects. However, capital spending is projected to come in between $2-and-$2.2 billion in 2016. In 2017, capital expenditures are set to decline to $450 million.

Once the expansion projects are complete, CF will begin to generate cash flow from these projects, and simultaneously enjoy declining capital expenditures. This is critical for the sustainability of CF's high dividend.

Buying CF Stock Requires Patience, But Could Pay Off

Some may question CF's decision to expand production capacity during a time of low prices for fertilizer. While CF ramping up production is likely to keep earnings suppressed, the long-term objective is to force high-cost producers out.

CF is trying to wait out high-cost Chinese producers, many of which have made a short-term market share grab but are sacrificing long-term viability. CF reiterated its belief on last quarter's conference call that global supply will fall at some point, because producing at a loss is unsustainable over the long term.

This is why toward the end of 2017, CF management expects to see a significant amount of capacity reductions, shutdowns, and decreases in nitrogen fertilizer exports from places like China.

Until the underling economics of its industry improve, CF is biding its time by cutting costs to keep its balance sheet healthy. The company has suspended buying back its stock and it is benefiting from lower input costs, primarily the falling cost of natural gas.

This has left CF with a relatively healthy balance sheet. The company ended last quarter with $2 billion in cash on the books. That represents approximately 22% of total enterprise value.

Investing in CF now will require patience. The turnaround may not come until next year, but the catalysts are there for a sustained recovery. The good news is that CF stock is cheap, with a forward price-to-earnings ratio of 18.

And, CF offers investors a 5.2% current dividend yield, which at least pays investors very well to wait for the turnaround to materialize.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.