By Dennis Slothower, Stealth Stocks

Rentech Nitrogen Partners LP (RNF) is a nitrogen fertilizer company located squarely in the corn-belt, which is the largest market in the U.S. for nitrogen fertilizers. It was spun off as a limited partnership from Rentech in 2011, and since that time has done nothing but go up.

Given the worst draught since the dust bowl and sky high grain prices, the demand for food and grains is not going away and neither is the demand for nitrogen fertilizers, especially next year.

This is a company that pays out dividends based on its cash flow, which is subject to variance. Earnings have been growing steadily: in Q4 2011 they were $0.30 per share, in Q1 2012 they were up to $0.51 per share, and in Q2 earnings climbed to $1.09 per share.

Earnings estimates are for Q3 to match Q2. However, farmers fertilize in the fall and in the spring, so if Q3 earnings match the second quarters, the fourth quarter should be higher reflecting the fall period when farmers are fertilizing their fields.

The latest quarterly dividend payout was $4.68 per share, which based on today's price is a dividend payout of 13%. Factor in the current global food shortage, and I wouldn't be surprised by dividend increases over the next year.

One of the input costs of making nitrogen fertilizer is natural gas. In fact, 50% of the cost of nitrogen fertilizers is based on the cost of natural gas.

Since natural gas prices have been in a sustained downturn over the past year, RNF's profitability has increased. I strongly recommended this stock for income seekers.

Still there is some risk of plant outage, which could dampen the dividend a bit, but notice you don't see this reflected in the growth pattern.

There is growth potential due to a DEF facility and increased ammonia capacity expansion and if we have another hot year, the demand for nitrogen fertilizers could increase greater cash flow, increasing the potential for an even higher dividend payout.

The stock is discounted to its intrinsic value of $54 a share at $37 to $38 a share. According to my numbers, shares should be selling in the $60 range. It is currently trading around the high $30s; so RNF has large upside potential.

Place a sell stop at 25% below your entry price. As the stock rises, continue to raise your stop so that you are trailing each Friday's close by 25%.

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