New issueRentech Nitrogen Partners (
) is producing big profit growth, a plus for a stock that pays a
The company makes nitrogen fertilizers and industrial products
such as ammonia and urea.
Rentech's production facility is in the heart of the Corn
Belt, the largest market in the U.S. for nitrogen fertilizer
The company's earnings bolted 162% in 2011 and it's off to a
fast start in 2012. Last month, Rentech delivered a 467% surge in
its Q1. That followed gains of 100%, 60% and 145% in previous
Revenue grew 31%, marking the second straight period of
accelerating growth. Higher selling prices and favorable weather
in the Mid Corn Belt (an area that spans Illinois, Indiana Iowa,
Missouri, Nebraska and Ohio) helped results.
Analysts polled by Thomson Reuters see earnings sprouting 160%
for the year.
On Monday, Dahlman Rose upgraded the agricultural chemicals
industry to attractive from cautious, citing a smaller corn corp
due to bad weather. A drought is affecting the Midwest, sending
corn prices surging. Dahlman raised Rentech to buy from hold.
Rentech is a master limited partnership, or MLP. This type of
structure provides tax benefits and income to investors. An MLP
avoids double taxation: It pays no income taxes at the corporate
level. Only cash payouts are taxed, from shareholders.
Unlike stocks, MLPs trade in units rather than shares. So its
investors are called unitholders, not shareholders.
While similar to dividends, MLPs return cash to unitholders
through distributions. These are usually paid on a quarterly
In May, Rentech paid a first-quarter distribution of $1.06 a
unit. The amounts paid each quarter will vary. At a quarterly
rate of $1.06 a unit, Rentech has a yield of about 15%. But the
company has said that it expects a distribution of about $2.86 a
unit for 2012.
Rentech shot out from a first-stage base in January and
climbed as much as 46% before consolidating again. It has
corrected about 31% and it's building the right side of a new