A 9% Yielder That Profits From the U.S. Agricultural Drought

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.
Considering that most markets were flat this week, your Dividend Pro portfolio had a terrific week. All but one of your positions ended the week higher. After a brief hiccup, mortgage REITs continued to perform extremely well. Last week’s recommendation Vanguard Natural Resources (VNR) also got off to a strong start, rising almost 3%. All of your current positions are now trading above their 50-day moving averages again and remain BUYs.
 
That puts me in a bit of a dilemma as your current portfolio is bursting at the seams with 13 holdings. At the same time, I am reluctant to recommend that you sell perfectly solid, high-yield plays. So I am going to hold off on a “sell” recommendation this week — and add yet another position to your Dividend Pro portfolio.
 
This week’s Dividend Pro bet is Coffeyville, Kansas-based CVR Partners, LP (UAN) which owns, operates and grows a pure nitrogen fertilizer business. As it is structured as a limited partnership, CVR’s focus is on paying sizable shareholder dividends.
 
For a fertilizer company, recent poor weather conditions for U.S. agriculture are good news for CVR. Excessive rains in the spring brought down corn production. Lower than expected production meant higher demand for fertilizer to grow the corn required.
 
Too much rain was followed by a drought hitting the fields late in the crop-growing cycle. This meant that many nutrients, nitrogen in particular, would have to be reapplied this fall to make the soil fit for the next round of spring plantations. That’s yet another boon for nitrogen demand. In fact, CVR Partners has already received heavy pre-fall orders, and already booked orders for almost all the ammonia it will produce for the next two quarters. No wonder its revenue grew at 68% year-over-year and its operating income has soared 500%.
 
So buy CVR Partners, LP (UAN) at market today, and place your stop at $22.50. For potentially bigger gains, buy the $30 February 2013 call options (UAN130216C00030000).
 
CVR’s current yield stands at 9%. CVR generally pays its distributions on or about the 15th day of February, May, August and November to holders of record on or about the first day of each month.

Portfolio Update

Global X SuperDividend ETF (SDIV) dropped 0.27%, as global markets stayed steady this week. With a yield of 7.38%, SDIV remains a BUY.
 
Two Harbors Investment Corp. (TWO) rose 2.28% last week. TWO is a real estate investment trust that invests in residential mortgage-backed securities, residential mortgage loans, residential real properties and other financial assets. The company last declared a dividend of $0.40 per common share, and today yields 13.90%. TWO is a BUY.
 
American Capital Agency Corp. (AGNC) recovered 2.12%. In a low-rate world, companies like American Capital could continue to be an ideal investment. The shares seem reasonably priced; the book value is $29.41 per share. Back above its 50-day moving average (MA), AGNC is now a BUY.
 
Prospect Capital Corporation (PSEC) was flat this week after reporting reported higher profit for the fourth quarter. The company will pay a monthly dividend of $0.1016 for the month of Aug. on Sept. 21.You received a dividend payment of $0.101575 on August 24th. PSEC is a BUY.
 
iShares FTSE NAREIT Mortgage REIT (REM) rose 1.84%. REM’s current yield is 11.93% and remains a BUY.
 
PIMCO Municipal Income Fund II (PML) rose 1.08% last week. Your monthly dividend payment will be coming up in two week’s time. Dipping back above its 50-day MA, PML is a BUY.
 
UBS E-TRACS 2xLeveraged Long Wells Fargo Business Development Company ETN (BDCL) rose 1.92%. The top performing ETF of 2012 with a gain of over 40%, it also boasts a yield of 13.93%. Trading above its 50-day MA, BDCL remains a BUY.
 
Apollo Investment (AINV) jumped 1.38%, as the stock looks to break out of its trading range. Yielding 10.0%, AINV is a BUY.
 
Omega Healthcare Investors Inc. (OHI) rose 1.23% over the past five trading days. This twenty year old company has maintained consistent and increasing dividend payouts for 10 years. OHI is a BUY.
 
PowerShares Preferred (PGX) rose 0.61%. This monthly income payer remains a BUY.
 
Fifth Street Finance Corp. (FSC) rose 1.25%. According to SEC filings on Aug. 28, Tannenbaum Leonard M (CEO) purchased a total of 10,000 shares at a total value of $104,750. FSC remains a BUY.
 
PowerShares Emerging Mkts Sovereign Debt (PCY) rose 0.43%.  Just last week, $54.1 million dollar flowed into this ETF — a 2.6% increase week over week in outstanding units. This play on foreign government debt yields over 5% and remains a BUY.
 
Vanguard Natural Resources (VNR) rose 2.91% the first week in your portfolio. Today, VNR will trade ex-dividend, for its monthly dividend of $0.20, payable on Sept. 14. This dividend works out to a dividend of approximately 0.70% per month and is a BUY.

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