The massive explosion at a Texas fertilizer facility has brought what may or may not prove to unwanted attention to fertilizer stocks Agrium Inc (NYSE: AGU), CF Industries Holdings Inc (NYSE: CF), CVR Partners LP (NYSE: UAN), Rentech Nitrogen Partners LP (NYSE: RNF) and Terra Nitrogen Company, LP (NYSE: TNH) which get a major portion of their revenue from nitrogen. I have to admit that when I first heard about the explosion, I immediately checked to see if the facility was owned by CVR Partners because I sold some of my natural gas stock last year and invested in it in order to diversify away from natural gas and get a higher yield. With that said, apparently the facility which exploded was not even a fertilizer plant, but some kind of retail facility.
Needless to say and aside from living next to a fireworks factory, a fertilizer facility would be at the bottom of my list of “risky stuff” I’d want to live near (e.g. even living next to a nuclear power plant or an oil refinery is probably less risky than living by a fertilizer plant…). However, a CNBC segment after the explosion noted that regulation of fertilizer “stuff” like ammonia is already pretty tight, meaning the only new regulation bureaucrats could come up with in the wake of the explosion might be to not allow new fertilizer facilities in heavily populated areas or near schools and nursing homes – regulations which would actually make sense and might keep new players out of the $10 billion fertilizer industry according to Citigroup.
So what about fertilizer stocks and more importantly, what’s the best nitrogen focused fertilizer stock for investors? Here is a quick overview of what investors have to work with largely on the nitrogen fertilizer side:
- Agrium Inc. A major retail supplier of agricultural products and services in North and South America, Agrium is a leading global producer and marketer (wholesale and retail) of agricultural nutrients and industrial products with three primary groups of nutrients: nitrogen, phosphate and potash (along with controlled-release fertilizers and micronutrients). On Thursday, Agrium rose 1.22% to $92.07 (AGU has a 52 week trading range of $74.28 to $115.31 a share) for a market cap of $13.72 billion plus the stock is up 7.9% over the past year and up 4.6% over the past five years. Agrium has a trailing P/E of 9.64 and a forward P/E of 9.33 along with a forward dividend of $2 and a forward dividend of 2.2%.
- CF Industries Holdings, Inc. A global leader in fertilizer manufacturing and distribution, CF Industries Holdings is second largest nitrogen fertilizer producer in the world and the third largest phosphate fertilizer producer among publicly listed companies. In addition and back in 2010, CF Industries Holdings acquired Terra Industries Inc. in order to become a nitrogen bellwether in the global fertilizer industry along with the premier nitrogen and phosphate fertilizer manufacturer in North America. On Thursday, CF Industries Holdings rose 3.03% to $178.06 (CF has a 52 week trading range of $154.17 to $233.43 a share) for a market cap of $11.22 billion plus the stock is down 4.4% over the past year and up 15.7% over the past five years. CF Industries Holdings has a trailing P/E of 6.23 and a forward P/E of 7.57 along with a forward dividend of $1.60 for a dividend yield of 0.90%.
- CVR Partners LP. Using state-of-the-art technologies, CVR Partners is a master limited partnership that produces urea ammonium nitrate (UAN) and ammonia fertilizer products. CVR Partners along with CVR Refining LP (NYSE: CVRR) is a subsidiary of CVR Energy, Inc. (NYSE: CVI), a diversified holding company involved in petroleum refining and nitrogen fertilizer manufacturing. On Thursday, CVR Partners rose 1.15% to $24.53 (UAN has a 52 week trading range of $19.21 to $30.00 a share) for a market cap of $1.79 billion is down 11.4% over the past year (meaning I am probably down by around that much) and up 39.8% since April 2011. CVR Partners has a trailing P/E of 16.04 and a forward P/E of 15.24 along with a forward dividend $0.77 for a dividend yield of 3.2%.
- Rentech Nitrogen Partners LP. A manufacturer and seller of nitrogen fertilizer products, Rentech Nitrogen Partners is a master limited partnership that's 60% owned by Rentech, Inc. (NYSEAMEX: RTK). Specifically, Rentech Nitrogen Partners owns and operates two fertilizer production facilities, one in Illinois and the other in Texas. The Illinois plant is one of the primary producers of nitrogen fertilizer products in the Mid Corn Belt region of the USA (the largest market in the country for nitrogen fertilizer products) while the Texas plant is the largest producer of synthetic granulated ammonium sulfate in North America. On Thursday, Rentech Nitrogen Partners rose 4.24% to $31.45 (RNF has a 52 week trading range of $21.08 to $49.18 a share) for a market cap of $1.22 billion plus the stock is up 12.9% over the past year and up 58.4% since November 2011. Rentech Nitrogen Partners has a trailing P/E of 11.33 and a forward P/E of 9.5 along with a forward dividend of $3 for a dividend yield of 9.2%.
- Terra Nitrogen Company, LP. As mentioned earlier, Terra Nitrogen Company is a master limited partnership that's an indirect, wholly owned subsidiary of CF Industries Holdings. On Thursday, Terra Nitrogen Company rose 1.57% to $197.59 (TNH has a 52 week trading range of $173.11 to $279.78 a share) for a market cap of $3.69 billion plus the stock is down 32.5% over the past year and up 26.4% over the past five years. Terra Nitrogen Company has a trailing P/E of 11.50 and a forward dividend of $14.52 for a dividend yield of 7.3%.
The Bottom Line. For me, I tend to prefer master limited partnership fertilizer stocks like CVR Partners LP, Rentech Nitrogen Partners LP and Terra Nitrogen Company, LP over Agrium Inc CF Industries Holding Inc for their yield, but even the non-MLP fertilizer stocks might be a fit for your portfolio.