Canada's largest potash producer is cutting its dividend for the first time since going public in 1989 in response to a sharp fall in fertilizer prices.

Potash Corporation of Saskatchewan (TSX:POT) announced the decision to shave 34 per cent off its dividend as the company, which reports in U.S. dollars, said net income dropped to US$201 million or 24 cents per share in the fourth quarter.

That was down from US$407 million or 49 cents per share in the fourth quarter of 2014.

The fourth-quarter profit was six cents below the consensus estimate of 30 cents per share and revenue was $65 million below the estimate of US$1.42 billion, according to analyst data compiled by Thomson Reuters.

Going forward the company will be paying a quarterly dividend of 25 cents US per share (down from 38 cents), which it says represents almost all expected profits for 2016.

"We believe this level -- which represents a payout ratio of close to 100 per cent of 2016 earnings -- remains highly competitive while also protecting the long-term financial health and financial flexibility of the company," said PotashCorp chief executive Jochen Tilk on an investor call Thursday.

PotashCorp has been hit by declining prices in potash as well as its nitrogen and phosphate fertilizer products. Potash prices were US$46 a tonne lower in the fourth quarter compared with US$238 a tonne in the same quarter last year. In late 2011, potash was selling for over US$450 a tonne.

In response to the tough market, the company recently announced the closure of its new Picadilly potash mine in New Brunswick, resulting in the loss of up to 430 jobs. The company expects to reduce capital spending by US$50 million as a result of the indefinite closure and reduce operating costs by $40 million to $50 million.

Tilk said on the conference call the company does not anticipate closing any of its Saskatchewan mines.

Despite uncertainty in the global economy, Tilk said the company expects demand to remain steady in 2016 and prices to stabilize.

"We enter 2016 against a subdued environment. That said, we do not expect a repeat of the uncertainty and erosion that occurred last year," said Tilk.

The company is forecasting 2016 earnings will amount to between 90 cents and $1.20 per share, including between 10 and 20 cents per share in the first quarter.