I just published an article on Seeking Alpha about one of the stocks in my portfolio; Alliance Resource Partners $ARLP.

ARLP is an Eastern MLP coal company that has been able to raise it’s distribution every quarter since 2007. This coal stock has had an impressive rise since the financial crisis, gaining over 300%. However the stock has been hard hit in recent weeks along with most of the rest of the market.

Coal’s here to stay

The gist of the article is that coal is here to stay and that ARLP is one of the most well run coal companies in the US.

Although there has been some opposition against coal as an industry, coal remains the second most productive energy source in the US.

total energy production arlp

Furthermore, when compared to gas and natural gas, coal is extremely abundant and will likely be around for another 4oo hundred years.

coal days left

Strong financials

Looking at Alliance Resource Partners, the stock stands out according to a number of financial criteria.

PE and future PE are both low (10.57 and 8.93 respectively) and PEG is 0.84. ROE is 35.20% and the company has managed to grow EPS at nearly 25% over the last five years.

Big dividend

But one of the most compelling features of ARLP is the large 6% dividend which has been paid out every quarter since 2003.

best coal stock dividend income

In fact, the dividend yield level has actually been a good way to time investments in ARLP over the last few years.

arlp-dividend-share-price

Basically, whenever the dividend yield has pushed through the 6% mark, it’s been an excellent time to buy. And this has been the case in late 2007, in 2009 and 2012.

In my opinion, October 2014 could be the next on that list.

Peter Lynch earnings line

Lastly, ARLP has just slipped under the Peter Lynch earnings line (standardised at PE = 15). In fact the stock is 32% below this fair value level suggesting that the stock is cheap at the present time.

peter-lynch-earnings-line

To see the full article on Seeking Alpha, click here.

Disclosure: I am long ARLP.

Additional disclaimer: Please be aware of the usual risks to trading in financial instruments. Please remember the importance of doing your own research and understand the cost to trade including trading commissions and the bid:ask spread.


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