More Reasons to like Coal
Another reason to like coal is the fact that Kinder Morgan Energy Partners LP (NYSE:KMP) has announced plans to start buying coal lands to lease out to miners. Kinder Morgan Energy Partners LP (NYSE:KMP) is one of the largest mid-stream energy investors, owning the infrastructure that gets oil and natural gas from the ground to where it’s needed.
The top- and bottom-lines can get complicated because of the partnership tax structure, but this industry giant has increased its distribution on a regular basis for more than a decade. That’s the real sign of strength that investors should be watching. With a broadly diversified business to support the coal push, this partnership is a decent way for conservative investors to inch into the coal market. And it already owns coal exporting terminals, so coal isn’t a completely new area for the partnership.
The best part is that Kinder Morgan Energy Partners LP (NYSE:KMP) yields around 6.1% and has a history of successfully pulling off opportunistic acquisitions. Even if this coal shift doesn’t pan out well, there’s no reason to expect the units to suffer for it.
More Aggressive
A more aggressive way to play a coal rebound is Alliance Resource Partners, L.P. (NASDAQ:ARLP). This partnership owns and works its own coal mines. Its main focus is serving the domestic energy market. While that means it won’t be a direct beneficiary of foreign demand, it does put it in prime position to benefit from a rebound in coal prices.
What sets Alliance Resource Partners, L.P. (NASDAQ:ARLP) apart from the competition, however, is the fact that it has posted record results despite the weak coal market. It expects to do that again in 2013. Continuing to invest in its coal business and boosting output are two key factors here, but so too is the company’s ability to gain market share.
About 95% of its coal production comes from Northern Appalachia and the Illinois Basin, where coal can compete with natural gas priced as low as $3. Even in a transition year, Alliance Resource Partners, L.P. (NASDAQ:ARLP) should prosper. This coal-focused limited partnership yields around 6.4% and has a long history of regular dividend increases. More aggressive income investors should like the growth potential here.
A Tough Year
There is no question that 2013 is going to be another tough year for coal. However, there are signs pointing to an eventual turnaround. Peabody Energy Corporation (NYSE:BTU) is one of the best positioned in the industry to benefit both from Asian demand and improved global pricing. Kinder Morgan Energy Partners LP (NYSE:KMP) is a way to partner with an opportunistic investor just getting into the space. Alliance Resource Partners, L.P. (NASDAQ:ARLP), meanwhile, is a high-yielding play on a company prospering despite coal’s malaise.
Reuben Brewer has a position in Kinder Morgan. The Motley Fool recommends Alliance Resource Partners, L.P.. Reuben is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Coal: The Fastest Growing Fossil Fuel originally appeared on Fool.com is written by Reuben Brewer.
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