Shares of Rentech Nitrogen Partners
How it got here
Investors were applauding a $1.06 cash distribution announcement from the company on Friday, pushing shares higher. If the distribution level stays that high, the stock would be yielding 14.5% -- an incredibly high level.
Management said that product deliveries were higher in March than expected because of favorable weather conditions, which have pushed up the farming season this year. The company expects to end the fiscal year with $2.34 per share in cash on hand.
Nitrogen fertilizer stocks have had a good run since the company hit the public market, separating itself from its old parent Rentech
An early planting season and a lack of flooding this year have helped conditions, which should lead to a strong year for earnings. But this is just one year and weather patterns can change quickly next year, so high distribution levels aren't guaranteed.
What's next?
Rentech hasn't been public long enough to have a long track record with earnings or distributions, so it's hard to identify a trend. Last quarter, the company only reached half of its expected earnings per share, a big disappointment for investors. The next quarterly result will be released in early May and should give us a better idea of where the business is headed.
I think the stock can continue its run because of the high level of distributions and a strong year for farming. The CAPS community has its doubts, though, giving the stock a two-star rating (out of five).
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