Alliance Resource Partners, L.P. (ARLP): Still The Best In Its Industry

For 2013, Alliance already has contracted 38.1 to 39.1 million tonnes of coal. Investors can track the company’s progress fairly easily as well, since in November of 2012 this figure stood at 37.1 million. Alliance is also reporting 30.7 million tonnes contracted for 2014 (up from 30 million a month or so ago). When was the last time you owned a stock that could confidently tell you they would have sales of at least a certain amount two years from now?

Risk Vs Reward
Alliance’s risks primarily relate to their investments for future growth. The company is spending money to develop a mine called Gibson South. They have also invested in White Oak, which is a partnership that should add significant coal production in the next few years. Both of these projects require cash to fund until they are operational. This helps explain why the company’s free cash flow payout ratio can stray over 100% from time to time. In addition, Alliance has strung together many quarters of consecutive dividend increases. If the company were to break this string, it might be a sign of trouble.

However, Alliance’s risks also offer investors huge reward. The company’s two big projects also offer future growth in production, which will be needed to meet what appears to be strong future demand. In addition, the company’s string of dividend increases is a main attraction to the stock. With a near 7% yield, what is better than knowing the yield will climb again in just three months? With shares trading at just over 10 times projected earnings, the stock seems reasonably priced, and just might be the perfect stock for income seeking investors.

The article Still The Best In Its Industry originally appeared on Fool.com and is written by Chad Henage.

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