Today, I bought shares in UAN (at price $89.37), also known as CVR Partners LP, a nitrogen fertilizer company that produces and distributes ammonia and urea ammonium nitrate products. While I prefer to diversify my portfolio, I couldn't find any other compelling deals in the current market.
My plan is to hold this stock until April or shortly after their dividend payment, which is expected sometime in May. The annual dividend yield of approximately 28% is impressive, especially since dividend stocks often have poor total valuation performance. Moreover, the company has an average NOI of $308mm over the past two years, and its current valuation is around $1.4B, meaning a 22% cap rate or 4.5 multiple on earnings. In other words, I see a potential 40% upside on the face value with a 22% annual yield. Additionally, the stock is currently trading 50% below its yearly high.
However, there are substantial risks to this investment. The company's corporate governance has a lot of control over UAN's operations, fluctuations in nitrogen fertilizer prices, weather conditions, and regulatory changes affecting the agriculture industry.