Why I Bought TNH

Last Friday I finally opened my position in TNH.

As I already wrote here I am moving my long term portfolio to a Dividend-focused portfolio.

Terra Nitrogen Co LP has a dividend yeld of 8.27% with a growth rate of 24.20% (5 years) and 26.90% (10 years).

Payout ratio is 79% (a little bit high but bearable) and a Yeld on Cost of 24.53% (5 years)

The company has No debts and in this moment everything looks good.

Returns are positive, steady and growing:

ROE 121.53%, ROA 108.34% and ROC 174,31%

Since this company is on my watching list the price dropped 24%, and now I can see it is really undervalued.

The Peter Lynch Value gives a fair price of 322$ (+157%).
The Discounted Cash Flow gives a fair value of 366$ (+192%).

The drop of the price is explained by decrease over the last year in Revenue (-16%) that gave the company other negative sides; EPS (-23%), Free cash flow (-29%).
The Book Value is always growing (+29%).

The downward trend is not stopped, so I could wait again but as I wrote in before, I decided to stop with other shares and put part of that money on this dividend focused.

Now My portfolio is balanced this way :

Services : 46%
Technology : 18%
Basic Materials : 13%
and others to reach 100%

2 thoughts on “Why I Bought TNH

  • February 15, 2015 at 10:46 pm

    There are many great dividend payers in the fertilizer and chemical space. TNH is just one. AGU and CF are also pretty solid dividend payers and think this is a pretty good long term buy even with its relatively high payout ratio. Thanks for sharing.

    • February 16, 2015 at 7:09 am

      In this moment I see TNH with higher dividend and better balance sheet. That payout ratio is a little scary but checking last 10 years I see it always been at this level or even more.

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