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While the virtual banks such as Annaly Mortgage (NLY) and Hatteras Financial (HTS) have been priced above their fair value, there are still stocks with high yields that are still trading below their fair value. These two companies pay a high-yield dividend above 12% with a positive earnings outlook for the near term. Equally important is these companies are still trading below their fair value estimates. Here is a discussion on the performance and expectations of these two stocks.

Rentech Nitrogen Partners (RNF), a fertilizer company, looks to benefit from the weather drought in 2012. Currently, Rentech is trading at $35.70, which is 48% below its fair value of $53. This indicates significant upside potential when Rentech delivers higher earnings in the early 2013 planting season.

For the three months ended June 30, 2012, net income was $41.2 million or $1.08 per unit. This compares with net income of $13.8 million for the comparable period last year. During the six months ended June 30, 2012, Rentech Nitrogen generated operating income of $61.1 million, compared with $44.9 million during the comparable period in the prior year.

Rentech Nitrogen Partners continues to benefit from relatively low North American natural gas prices, which, when coupled with strong nitrogen product prices, contributed to gross profit margin of 65% for the period, up from 50% for the comparable period in the prior year.

The company said that it expects FY12 cash available for distribution to be in excess of $126 million or $3.30 per unit, and EBITDA to be in excess of $130 million. This compares with the previous guidance of EBITDA in the range of $120 million and cash available for distribution in the range of $109 million, or $2.86 per unit.

Looking ahead to 2013, the company expects 2013 to benefit from market dynamics similar to those of 2012. It said that the impact of the drought on ending corn stocks will likely result in continued high prices and significant acres planted next year. Low corn inventories should drive corn pricing throughout the year and support strong fertilizer demand.

Rentech Nitrogen Partners pays an annual dividend of $4.68 for a current dividend yield of 13.18%. The company started dividend payouts in Q2 2012 after its IPO in November 2011. The First Call analysts have Rentech Nitrogen Partners rated at 2.0 for a Buy.

Ellington Financial LLC (EFC), a specialty finance company that acquires and manages mortgage-related assets, announced that its estimated book value per common share as of August 31, 2012, was $23.98, or $23.52 on a diluted basis. Ellington is currently trading at $22.50, 6.58% below the net asset value. Ellington has a current fair value of $30 indicating it is 33% below fair value.

Ellington Financial reported a net increase in shareholders' equity resulting from operations (net income) for the second quarter of $10.8 million or $0.64 per basic and diluted share. The company's results were driven by positive contributions from both its non-Agency and Agency MBS strategies. For the six months ended June 30, 2012, net income was $42.8 million and represented an annualized return on equity of 22.0%.

The company raised money with a recent public offering of 3,500,000 common shares priced at $22.45, which closed on August 20, 2012, and resulted in net proceeds to the company of $76.7 million.

Ellington Financial pays an annual dividend of $2.80 for a current dividend yield of 12.47%. Ellington Financial increased its dividend by 75% in Q2 2012. The company payout ratio is 74%. The First Call analysts have Ellington Financial rated at 2.0 for a Buy.

Source: 2 Undervalued Stocks With 12% Or More Dividend Yield