Balance rough-and-ready issues with some safer bets

Dear Mr. Berko: I have $40,000 in cash sitting in my IRA that I need to invest for dividends and growth. I've got to be careful with this money, though, because at age 78, I'm not working and cannot earn back the money I might lose. My broker recommended CVR Partners because he thinks the dividend will grow and could triple by 2014, which sounds good to me. I would invest $20,000 in this stock. He also recommended Glacier Bank. It doesn't yield much, but he thinks the stock can move back to the $30 level, where it was before the market tanked. My broker also thinks the dividend could double by 2014. I would invest $20,000 in this as well. I need the income and I need the dividends to grow higher and I want to own conservative stocks, of course. Please tell me about these two. My son and daughter-in-law want me to get your opinion before I put money in these stocks. RR, Joliet, Ill. Dear RR: I don't need to look up the word "conservative" in my Funk and Wagnalls, but I think that perhaps you might learn something if you did. Those stocks are about as conservative as a hurricane. And if $40,000 is important money to you, then you'll have too many biscuits in one box, especially for two rough-and-ready issues such as these. If you were only 20 or 25 years younger I would say, "Hey, go for it." But at 78 and hopefully soon to be older, those issues may be too aggressive for your blood. Fertilizers can make buildings go boom and the world go around. And CVR Partners, LP Common (UAN-$23.23), derives its revenues from the production and sale of nitrogen fertilizers only for the agricultural market. UAN, a new publically traded entry in the fertilizer business, uses coke gasification to produce a high-quality nitrogen fertilizer. This is the stuff that increases crop yield per acre and makes corn grow knee-high by the 4th of July. In 2011, UAN expects to report $1.65 a share on about $186 million in revenues. The $2.29 dividend (a good portion is return of capital) yields 9.7 percent. The yield is attractive; earnings and dividends may increase this year and perhaps next year; and cash flow looks clean. But I can't get comfortable with the stock. Nothing looks out-of-place; it just feels like an itch that I can't scratch. The business is profitable and uncomplicated -- definitely in a growth mode -- and demand is growing worldwide. Still, something doesn't sit right. Rather than investing $20,000 in 800 shares of UAN, consider owning just 400 shares, and buy 30 shares of Terra Nitrogen (TNH-$175), which is in the same business, earns $24,000 a share and pays a $15.84 dividend yielding 8.50 percent. TNH, which has $800 million in revenues and trades at half the price-earnings ratio of UAN, feels better to me. Glacier Bancorp (GBCI-$12), homeported in Kalispell, Mt., where the winter temperatures can get a little chilly, was founded in 1955 and has over 100 branches in Idaho, Wyoming, Colorado, Utah and Montana. I'm disappointed that management hasn't done a better job of running this bank. In the past 10 years, GBCI's revenues, assets, loans and net interest income have tripled. However, management grew earnings by only 20 percent and loan loss provisions increased 20-fold. And while the tax rate fell by 60 percent, non-interest costs increased by 320 percent, and the dividend was sliced 50 percent, all thanks to GBCI's very unique management skills. Now, if you believe that the economy is turning around; that employment will pick up; that consumers will be earning and spending more money; that home prices will rise again; that auto sales will zoom; and that there won't be a recession in Europe, then GBCI could run up a point or two, and the 52-cent dividend yielding 4.5 percent could be raised. GBCI might earn 91 cents on $318 million in revenues this year, but at 13 times earnings, I think the shares may be a bit rich. Keep the remaining $20,000 in a money market fund. Cash gives you time to think and seek alternatives. ---------- Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. Visit Creators Syndicate website at www.creators.com. © 2011 Creators Syndicate Inc. Published: Wed, Dec 14, 2011