Revisiting the Best-Run Coal Company in America: Alliance Resource Partners L.P. (ARLP)

Alliance Resource Partners’ payout and operating performance simply blows the competition away.  Peabody pays a paltry dividend yield in comparison, around 1%, but hasn’t been able to provide investors with a dividend increase since 2010. Worse yet, its dividend yield pales in comparison to the painful loss of principal investors have endured.  Alpha Natural doesn’t even pay a dividend, and reported huge losses in 2012.

Net income for full-year 2012 clocked in at $6.12 per unit which means the company is trading at a trailing price-to-earnings ratio of 10.  Alliance offers not only a great yield, but fantastic distribution growth—13.6% compounded annually over the last five years.  Alliance was a screaming buy below $60, but even its current level of $63 represents a compelling entry point.

A Great Company with a Great Valuation

Alliance Resource Partners is solidly optimistic about its future, and so am I.  I’ve owned the units for almost a year, and the company represents one of my biggest holdings.  The prospect of continued record operating results and a 7% yield that is increased quarterly makes this company one of my favorites to own.

In addition, the units are cheap:  Alliance is currently trading at an attractive trailing P/E of only 10.  Great stocks that provide a compelling combination of growth and income don’t stay cheap for long.  Investors interested in Master Limited Partnerships (MLPs) would be wise to devote additional research to this great company.

The article Revisiting the Best-Run Coal Company in America originally appeared on Fool.com and is written by Robert Ciura.

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