Terra Nitrogen: Feeding The World With Fertilizer, Feeding Investors With An 8% Dividend Yield

The price of agricultural commodities boomed in the immediate aftermath of the Great Recession. The boom quickly turned into a bust, however, leaving many agriculture stocks in the dirt.

From 2013-2016, agricultural commodities have collapsed. While this has been a boost to consumers, in the form of low grocery prices, it has been a source of great pain for agricultural producers.

Lower farm incomes have suppressed demand for everything from farming equipment to fertilizer.

This has notably affected Terra Nitrogen LP (TNH), a Master Limited Partnership engaged in the production of nitrogen fertilizer products.

After hitting a high of $268 in April 2012, Terra Nitrogen has steadily fallen since then, to its current level of $81.

The upside is that Terra Nitrogen may be a buying opportunity on valuation and dividend income. It is one of 416 stocks with a 5%+ dividend yield trading on major US stock exchanges.

This article will discuss why Terra Nitrogen stock could be attractive for investors looking for high-yield stocks in the agriculture industry.

Business Overview

Terra Nitrogen is structured as a Master Limited Partnership. This means it has a general partner, which is Terra Nitrogen GP Inc.

The general partner is a wholly-owned subsidiary of CF Industries (CF). As of December 31, 2016, CF Industries owned 75% of Terra Nitrogen’s outstanding common units.

Terra Nitrogen’s principal products are ammonia and urea ammonium nitrate. These products are used primarily by farmers, to improve crop yield and quality.

It has production capacity of 1.9 million tons of urea ammonium nitrate solutions and 1.1 million tons of ammonia each year.

In 2016, Terra Nitrogen sold 2.2 million tons of nitrogen fertilizer, with net sales of $418.3 million and net earnings of $209.3 million.

Falling nitrogen fertilizer prices have taken a steep toll on the company over the past three years, and rising ammonia production has been only a modest offset.

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