Fertilizer is Nothing to Sneeze at, Nor is TNH's Yield, So We Thought

TNH may have been as good a place to park your money in fertilizer, but it's dividend has the quality of a John Malone deal. The giant To Good To Be True yield topping 11.40% today. It would have been a great stock to feature as a Yield Hoe favorite in a stong sector. After all, soft commodities have been piping hot, and Terra has the look of a magic bean, well maybe the stuff you sprinkle on the beans to make them grow your way out of massive protracted historical debt on the back 40. It looked great.

It's P/E is 11ish; It's chart is looking "just like New York", as they say, or forever upward, right? It's under covered by Wall Street, with just 3 seed counters on it (analysts), and it's enjoying all the reflected love of similarly situated companies such as CF, AGU and even POT.

It's products are an important part of the agro business: The company's products include anhydrous ammonia, a form of nitrogen fertilizer and the feedstock for the production of other nitrogen fertilizers; and urea ammonium nitrate, a liquid fertilizer. It sells its products primarily in the Central and Southern Plains and the Corn Belt regions of the United States. The company's customers include dealers, national farm retail chains, distributors, and other fertilizer producers and traders.

It looked great, until we ran across a Tim Plaehn's eye opening correction on SeekingAlpha.com warning about the tiered structure of TNH payout. It appears the general partner has a "high water mark" deal with the cash printing TNH where it gets the lion's share of the dividend. Tim was a Math major, a stock broker and an Air Force Pilot, so who are we to disagree when he says-- watch out below on that next dividend. Tim says owning the parent, TRA is a better bet at this point after TNH ran from 20 to 150 in 20 months, with the promise of that fat yield hanging like a carrot. But Tim owns neither.

Tim's original take on it is the subject of debate by several sharp eyed THN watchers, but it's a case of horse shoes or land mines. Nobody is saying there is no adjustment coming...

While it may keep bucking the overall market's rise and fall with the rest of those companies that make crops profitable, including DE, POT, MOS, MON, AGU, CF, chances are the holders who have if for yield are going to wake up with the short or "fertilized" end of a stick they did not know they had.

So basically, if you buy it, watch it, or maybe wait for a pullback to see what becomes of that juiced up yield after the General Partner's share is paid out.