Terra Nitrogen Grew Like Gangbusters in 2011

As 2011 comes to a close, it's a great time to look back at what happened to the stocks that interest you. By making sure you know the important things that a company accomplished -- as well as the setbacks it experienced -- you can make a better decision about whether it's a smart investment for your portfolio.

Today, let's take a look at Terra Nitrogen (NYSE: TNH  ) . The fertilizer company has capitalized on the strong environment for the agricultural industry, turning high crop prices into a major profit opportunity. As a result, the company's stock price has grown at least as fast as the crops its products fertilize. Below, I'll take a closer look at the events that moved Terra Nitrogen's shares this year.

Stats on Terra Nitrogen

Year-to-Date Stock Return 59.8%
Market Cap $2.93 billion
1-Year Revenue Growth 42.5%
1-Year Profit Growth 179.8%
Dividend Yield 10.1%
CAPS Rating *****

Source: S&P Capital IQ.

Why did Terra Nitrogen soar this year?
As a producer of nitrogen-based fertilizers, Terra Nitrogen has tapped into the big trend toward agriculture-industry investments. Ordinarily, high fertilizer prices might reduce demand, but with farmers flush with cash from high crop prices, they can afford to pay up to increase yields. Moreover, Terra Nitrogen in particular has outperformed most of its peers in part because it avoids mined products like potash that are more expensive to produce, which has hurt companies like PotashCorp (NYSE: POT  ) and Agrium (NYSE: AGU  ) .

Terra Nitrogen is structured as a master limited partnership, and CF Industries (NYSE: CF  ) is its majority owner. The MLP structure is what's behind Terra Nitrogen's big dividend, which edges out CVR Partners (NYSE: UAN  ) and far exceeds more traditional fertilizer plays Mosaic (NYSE: MOS  ) and PotashCorp.

It may be hard to believe, but just a few months ago, Terra Nitrogen shares were even higher. But a USDA crop report showing that corn stockpiles were higher than estimated raised doubts about how long high crop prices will last. Anything that crimps farmers' finances could have a devastating impact on Terra Nitrogen's growth going forward.

As long as the agricultural markets stay healthy, however, Terra Nitrogen should continue to produce some amazing results. At a reasonably low valuation compared to recent earnings, it would take a big contraction in profits to make Terra Nitrogen reverse course.

Even though agriculture has been a popular spot for investors lately, we think there's an even better place to invest. Check out The Motley Fool's latest special report to discover our top stock pick for 2012. It's free but it won't be available for long, so get your copy now.

Click here to add Terra Nitrogen to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.

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Related Tickers

10/21/2016 4:02 PM
TNH $107.45 Down -0.46 -0.43%
Terra Nitrogen CAPS Rating: ****
AGU $91.03 Up +0.85 +0.94%
Agrium CAPS Rating: ****
CF $25.92 Up +0.94 +3.76%
CF Industries Hold… CAPS Rating: ****
MOS $24.31 Down -0.38 -1.54%
Mosaic CAPS Rating: ****
POT $16.41 Up +0.20 +1.23%
PotashCorp CAPS Rating: ****
UAN $5.15 Down -0.01 -0.19%
CVR Partners CAPS Rating: ****