In my Cash Machine advisory service, we recently banked gains of nearly 118% in stalwart dividend-payer Terra Nitrogen (NYSE: TNH), a leading nitrogen fertilizer supplier whose product is used primarily in the production of corn. We took profits in this company before last Friday’s dismal August employment report caused stocks to turn south.
Yet the metrics in corn and other agricultural commodities still are very bullish. In fact, the latest crop reports show corn shortages across the nation, and big plantings for winter and spring are in the works that could be huge for the fertilizer companies.
While the big gains in Terra Nitrogen may have already been realized, TNH isn’t the only fertilizer firm I like. Another one of my favorites is CVR Partners (NYSE:UAN).
CVR Partners is focused primarily on manufacturing nitrogen fertilizers. The company’s facility is the only operation in North America that uses a petroleum coke gasification process to produce nitrogen fertilizer. This helps make it the lowest-cost producer of nitrogen fertilizer in the U.S., and arguably the world.
The company went public on April 7, and it priced at $16. Demand for UAN was extremely robust, as the new issue was five times oversubscribed. The company has already said it will pay a $1.92-a-share share annual distribution coming out of the gate. The company reaffirmed this guidance in late-July. My sources close to the company tell me this dividend is solid as a rock.
Like the big win we saw in Terra Nitrogen, I think CVR Partners is a prime candidate for another triple-digit percentage gain. Despite the pullback we’ve seen in stocks of late, UAN shares have managed to power nearly 16% higher over the past three months. And while the shares have pulled back nearly 4% over the past week (and another 1% on Monday), I think that makes them even more attractive right now, especially if you’re an investor looking to buy high-quality dividend stocks on the dip.
We’re in an agricultural super-cycle driven by the rise of the lower-middle classes in many of the emerging market nations. Here we see appetites for better foods increasing—along with the money to pay for them. The key to raising more high-quality crops, and feeding more livestock, is greater corn production. To accomplish this, you need to fertilize the soil, and that’s why a stock such as CVR Partners is so compelling.
Bryan Perry recommends UAN in his Cash Machine advisory service.
