Important Updates for Investors
Carla Pasternak's Premiere Issue of High-Yield International Just
Released
Income expert Carla Pasternak's debut issue of High-Yield
International covers a Taiwanese manufacturer yielding 9.5%... a
rare Mexican monopoly yielding 13.4%... and other top-performing
investments yielding up to 19.0%.
Government's Biofuel Timetable Could Spell +15,900% Growth
+15,900% growth might seem far-fetched... but it's not. In fact, it
is mandated by law. And I've identified the ONLY stock positioned to
capture this growth.
The
Silver Lining to a Falling Dollar
Despite the U.S. national debt, there is a silver lining for income
investors. This massive spending, combined with movement out of U.S.
Treasuries, is going to take its toll on the dollar, and
international income investors could reap the rewards in the form of
higher dividends. |
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Low Input Prices Bode Well for this
Growing Fertilizer Company |
Published:
April 7, 2009
Terra Nitrogen (NYSE: TNH) produces ammonia and nitrates used in
agricultural crop fertilizers. Its assets consist of a nitrogen plant in
Oklahoma and storage terminals in Nebraska and Illinois. Products are
sold wholesale to chemical firms, farm dealers, and national retail
chains in the central and southern US. Structured as a master limited
partnership, TNH is managed and capitalized by global feritlizer-maker
Terra Industries (NYSE: TRA), which owns 75.3% of the units (MLP
shares).
As an MLP, Terra Nitrogen is legally required to
pass along at least 90% of its taxable income to partners (MLP
shareholders) to avoid paying corporate income taxes. In addition, the
partnership agreement with the general partner requires the company to
distribute 100% of available cash to partners. The amount of income and
cash varies from quarter to quarter, and so do total payouts. Still,
over the past five years, payouts have grown a remarkable +762% from
$1.75 a unit in 2004 to $15.08 a unit in 2008.
In the last four quarters, TNH's distribution varied from $4.20 per
unit, to $3.63, to $2.80, back up to $2.97. That equates to $13.60 per
unit annually and gives an historical yield of 10.5%.
Annualizing the last payment of $2.97 gives almost as rich a current
yield of 9.1%.
Most of the payout consists of cash flow, which counts as tax deferred
return of capital. The income portion as taxable at your ordinary income
tax rate and so is the cash portion but not until you sell the units.
However, MLPs are best held outside a tax-deferred IRA type of account
due to certain tax complexities. Currently there is no dividend
reinvestment plan for TNH.
The company has profited from low natural gas prices
and high nitrogen fertilizer prices. In 2007, the price of natural gas,
used in making TNH's nitrogen fertilizer products, accounted for some
64% of total expenses. The selling price of the company's nitrogen
fertilizer products, which is influenced by global supply/demand
balance, also affects profits. Full-year 2008 earnings rose +37% over
the previous year to $14.90 per unit, mainly on higher selling prices.
In the coming year, we expect the trends that
emerged over the past year to remain largely in place but the global
economic slowdown may prove a mixed blessing. It will likely create some
weakness in nitrogen demand that could pressure sales volumes and
selling prices while also keeping a lid on natural gas costs.
A more immediate headwind, however, relates to the three-way battle
between parent Terra Industries and rival fertilizer makers CF
Industries (NYSE: CF) and Agrium (NYSE: AGU). In January, CF made a
hostile all-stock take-over bid for Terra valued at around $20 per
share. Terra directors unanimously voted against the deal and urged
investors to reject the offer. Reportedly, under Iowa laws, CF can't
close an acquisition of Iowa-based Terra without approval from Terra's
board.
A month later, rival fertilizer maker Agrium (NYSE: AGU) made a
competing bid for CF Industries. CF's board rejected the bid and on
March 9th, CF upped the ante for Terra, offering between $25.42 and
$27.94 per Terra share, based on Terra's closing share prices. The final
outcome may or may not be favorable for Terra Nitrogen, but so far
investors appear unfazed. The units have almost doubled in value, rising
from their October low of $65.20.Good investing!
[http://www.streetauthority.com/includes/editor-profiles-hy.htm]
Disclosure: Carla Pasternak
does not own shares of TNH.
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