The correct answer is      (A.) Terra Nitrogen (TNH)

Terra Nitrogen produces ammonia and nitrates used in agricultural crop fertilizers. Its products are sold wholesale to chemical firms, farm dealers, and national retail chains in the central and southern U.S. Structured as a master limited partnership, TNH is managed and capitalized by global feritlizer-maker Terra Industries (NYSE: TRA), which owns 75.3% of the units (MLP shares). As an MLP, Terra Nitrogen is legally required to pass along at least 90% of its taxable income to partners (MLP shareholders) to avoid paying corporate income taxes.

There aren't many companies like Terra Nitrogen these days. Most companies aren't legally obligated to pay dividends, and with the economy contracting, dividends are shrinking at the fastest pace in decades. It's hard to trust any company's dividend safety when former dividend stalwarts like General Electric (NYSE: GE), Dow Chemical (NYSE: DOW), Pfizer (NYSE: PFE), and Bank of America (NYSE: BAC) slashed or eliminated payouts. By the end of 2009, Standard & Poor's predicts dividends for companies in the S&P 500 index will drop -23%, the worst drop in over seven decades.

But many of these cuts haven't been entirely random. Companies with heavy debt and falling profits are leading the parade. In today's environment where credit is costly and earnings are slowing, the safest dividends come from companies with the strongest balance sheets -- and that means little debt or better yet, no debt at all. But a clean balance sheet is just a start. A high-yield stock that loses -30% of its share price is hardly a profitable investment.

So if you're looking for high yield issues with capital gains potential, check out Carla Pasternak's latest issue of the High-Yield Investing newsletter. Although she's found dozens of high-yield issues (up to +13%!) that enjoy healthy, debt-free balance sheets and conservative payout ratios, only a handful -- seven, to be exact -- also enjoyed average total returns so far this year of +20% versus -12% for the S&P 500 index. Companies like these are poised to lead the charge when the markets start to recover, and Carla offers an in-depth look at them. To learn the names of these stocks, and to learn more about High-Yield Investing, please visit this link.