CVR Partners Hits Second Spot on the Dividend Yield and Quality Leaderboard
CVR Partners (US: UAN) is a subsidiary of CVR Energy (US: CVI) that produces and sells nitrogen fertilizer products in the US. Management describes CVR Partners as a growth-orientated limited partnership that was formed by CVR Energy to operate and grow the fertilizer business.
The nitrogen fertilizer production facilities located in Kansas and Illinois primarily produce ammonia and urea ammonium nitrate (UAN) fertilizers. The plant in Kansas is the only facility that uses a petroleum coke gasification process to make hydrogen, a key ingredient in its manufacturing process. The Illinois facility uses natural gas as its feedstock to produce nitrogen fertilizer.
CVR Partners has risen to the second rank on the Fintel United States dividend and quality leader board with 98.93. The score combines a stock’s dividend yield and growth metrics and generates a result by ranking many constituents that pay distributions. UAN has a current annualized dividend yield of 16.21% based on a current annualized dividend of $20.96 per share, including all recent abnormal distributions.
UAN has been a strong beneficiary of rising food prices which has seen its shares climb over 110% in the last year and 52% in 2022 alone against a market that has been falling. Since the beginning of May, shares have given up some of the gains, falling 12.7% but have experienced strong support around the $130 mark. Even with the significant share gains, the stock continues to trade on a price to earnings multiple of 7x.
Earlier in May, CVR Partners reported first quarter earnings with earnings per share of $8.78, rising from $5.76 in the previous quarter and -$2.37 in the prior-year comparison. Net revenue grew to $223 million during the quarter, rising from $189 million in the prior quarter and $60.9 million for the previous year. The board declared a Q1 cash distribution of $2.26 per unit, paid on the 23rd of May.
CEO Mark Pytosh commented, “CVR Partners achieved strong first quarter results led by robust global industry conditions” and highlighted, “CVR Partners has returned an equivalent value to unitholders of approximately $13.30 per common unit through declared cash distributions and unit repurchases, in addition to the $95 million debt reduction, equating to $8.89 per common unit.”
The $13.30 in distributions and $8.89 in debt reduction totals $22.19 per share or 17.2% in shareholder attribution based on the 27th of May closing price of $129.31.
On the back of rising fertilizer prices resulting from Ukraine conflict, UAN could see continued strong cash flows and potential strong distributions over the year ahead. This is due to Ukraine, Russia and Belarus making up to 20% of global fertilizer capacity.
UAN provided some cost guidance for Q2, where they expect direct operating expenses between $55-670 million and a total Capex spend of $12-17 million.
UAN has an interesting investment company structure that results in most profits going to investors. The dividends, cash generation, and six-month stock momentum give UAN a Fintel quality value momentum (QVM) score of 73.67 and place the stock in the top 14% of 3,700 constituents.
When analyzing the underlying options market for UAN, Fintel analysis identified a Put/Call Ratio of 0.53, which indicates bullish sentiment from all total disclosed put and call positions. Two charts have been included below; the first is the behavior of the put/call ratio for the stock over the last three months, and the second chart shows the call and puts options in the stock over a long-term horizon showing multiyear trends.
UAN also has a Short Squeeze Score of 77.67. While this score is not extremely high, it still places CVR Partners in the top 22% of total constituents, with 4.81% of its flat currently shorted, according to Nasdaq and Capital IQ data. The short positions in UAN have 3.58 days to cover.
CVR Partners will next report second-quarter results around the 27th of July.
This article was originally published By Ben Ward on Fintel.io.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.