Alliance Resource Partners, L.P. (ARLP), Natural Resource Partners LP (NRP), Rhino Resource Partners, L.P. (RNO): Income Plays in Coal

Of note is the company broadening portfolio. Although coal is the driving force, management has been moving the company into other “natural resources,” including natural gas, for years. So, the company is slowly becoming a much broader resources play. Like Alliance Resource Partners, L.P. (NASDAQ:ARLP), management continues to invest in the business despite the difficult coal environment.

More risky

Rhino Resource Partners, L.P. (NYSE:RNO) is the highest yielding option here, with a yield of around 12.80%. It owns and operates coal properties, has a coal leasing business, and is starting to venture into natural gas, too. That said, the company has been pulling back on its production and cut its distribution.

These are mixed blessings. The company has been unwilling to enter into unprofitable coal sales just to keep plants running. That shows an important level of discipline. The dividend cut, meanwhile, shows fiscal prudence, despite the bad taste that it can leave.

The cut was relatively small, though, and was accompanied by the LP’s general partner (GP) cutting out its distributions. That can be taken as a sign of weakness or as a highly supportive gesture from a committed GP. Since Rhino Resource Partners, L.P. (NYSE:RNO) is building out a new mine, investing in the future of its business, I see the GP’s actions as a positive.

This is the riskiest of the trio, but also the highest yielding. It’s a decent option for more aggressive types.

Fear

Lots of people talk about investing where others are afraid to tread. Coal is just such a place, even though there are solid long-term reasons to like the fuel source. Income investors should first look at Alliance Resource Partners, L.P. (NASDAQ:ARLP), then consider riskier fare like Natural Resource Partners LP (NYSE:NRP) and Rhino Resource Partners, L.P. (NYSE:RNO).

Reuben Brewer has a position in Natural Resource Partners LP (NYSE:NRP). The Motley Fool recommends Alliance Resource Partners, L.P. (NASDAQ:ARLP).

The article Income Plays in Coal originally appeared on Fool.com.

Reuben is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.