Terra Nitrogen (TNH) hit a new 52 week high today of $157.00 per share. This fertilizer company has skyrocketed since April 2011. I'll bet you're wondering if you should you buy, sell, or hold TNH shares at $157.00? You should hold them if you own them because TNH is only trading at 15.7 times the company's five year average adjusted earnings of $9.97 per share. Sit back and collect the dividend until the shares climb to 20 times average earnings which would be $199.40 per share.
Terra Nitrogen is not a high dividend stock right now due to the huge stock price advance since July 2010. The company is paying a $1.36 quarterly dividend per share. There was a special dividend last quarter that is confusing all the online dividend yield calculations. The dividend yield is closer to 3.4% when the special dividend is removed. That is still a good dividend compared to the pathetic S&P 500 average of around 2%.
If you don't own Terra Nitrogen, then consider buying it when it drops back to the $90 - $119 range. The stock would be trading at 12 times its five year average earnings when the price is at $119. At $90 TNH would sport a dividend yield of 6% if it keeps its $1.36 quarterly dividend in place. The dividend is fairly safe. In the 1st quarter of 2011 TNH earned $3.60 per share and paid out $1.36 in dividends. That is a low 37.7% dividend payout ratio. Let's look at this even more cautiously: assume for a moment that the company only earns its five year average in earnings - $9.97 per share. The dividend payout ratio at the end of 2011 would only climb to 54.5% ($5.44 annual dividend / $9.97 average annual earnings).
Terra Nitrogen has a strong balance sheet. It has $252.1 million in current assets (most of that is cash and cash equivalents) and only $55.5 million in current liabilities.
| CONSOLIDATED BALANCE SHEETS | ||||||
| March 31, | December 31, | |||||
| 2011 | 2010 | |||||
| (in millions, except for units) | ||||||
| ASSETS | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 221.7 | $ | 124.8 | ||
| Demand deposits with affiliate | 10.7 | 6.1 | ||||
| Accounts receivable, net | 1.2 | 33.4 | ||||
| Inventories, net | 16.7 | 27.6 | ||||
| Prepaid expenses and other current assets | 1.8 | 1.2 | ||||
| Total current assets | 252.1 | 193.1 | ||||
| Property, plant and equipment, net | 82.6 | 83.2 | ||||
| Plant turnaround, net | 11.9 | 13.4 | ||||
| Other assets | 6.8 | 7.0 | ||||
| Total assets | $ | 353.4 | $ | 296.7 | ||
| LIABILITIES AND PARTNERS' CAPITAL | ||||||
| Current liabilities: | ||||||
| Accounts payable and accrued liabilities | $ | 22.0 | $ | 24.3 | ||
| Customer advances | 33.1 | 61.2 | ||||
| Other current liabilities | 0.4 | 0.8 | ||||
| Total current liabilities | 55.5 | 86.3 | ||||
| Noncurrent liabilities | 0.7 | 0.4 | ||||
| Partners' capital: | ||||||
| Limited partners' interests, 18,501,576 Common Units | ||||||
| authorized, issued and outstanding | 250.0 | 208.5 | ||||
| Limited partners' interests, 184,072 Class B Common Units | ||||||
| authorized, issued and outstanding | 1.4 | 0.6 | ||||
| General partners' interest | 45.8 | 0.9 | ||||
| Total partners' capital | 297.2 | 210.0 | ||||
| Total liabilities and partners' capital | $ | 353.4 | $ | 296.7 | ||
To read the other articles I've written on Terra Nitrogen click here: http://www.myhighdividendstocks.com/category/high-dividend-stocks/terra-nitrogen
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