CONSOL Energy Inc. (NYSE:CNX)’s coal division results reflect the extremely challenging environment for coal. Like many of its rivals, CONSOL saw reduced coal prices and volumes during the quarter.
The company’s strategy going forward involves cost cuts and asset sales, which should buoy profits but should not be viewed as a viable long-term plan.
The canary in the coal mine
Investors who are interested in the coal space would do themselves a huge favor by considering Alliance Resource Partners, L.P. (NASDAQ:ARLP), a limited partnership that holds a nearly $3 billion market capitalization.
Alliance Resource Partners, L.P. (NASDAQ:ARLP) amazingly excels where others fail. Its success in what is such a tough operating environment for coal is truly astounding.
The company’s second-quarter results set a record for revenues, coal sales volumes, and EBITDA. In all, revenue and EBITDA rose 4.5% and 14.7%, respectively, year over year.
But perhaps the best reason to own Alliance Resource Partners is its compelling distribution, which the company keeps bumping higher every quarter, indicative of its success.
Alliance Resource Partners increased its distribution by 2% this quarter, and on a year-over-year basis, its $4.61 per-unit distribution is 8.5% higher than it was this time last year.
The increased distribution represents the 21st consecutive quarterly bump up in a row. Alliance Resource’s new payout represents a solid 6% yield at recent prices for new investors.
Looking ahead, the future remains bright for Alliance Resource Partners. Along with its second-quarter results, the company upped its 2013 guidance for revenue and coal sales volume. And, assuming customer deliveries occur as planned, Alliance Resource Partners is fully priced and contracted for its expected 2013 coal sales.
Let Alliance Resource Partners fire up your portfolio
Operating in the coal industry might give pause to a potential investor. It’s true that coal is under pressure with cheap natural gas and the prevailing push for clean energy sources such as wind and solar.
And, there’s no denying the serious troubles facing many of the nation’s coal companies.
At the same time, not all is lost for America’s coal producers. Alliance Resource Partners continues to shine while others struggle. As Alpha Natural and CONSOL Energy lose money and report lower metrics across the board, Alliance Resource Partners is ramping up its production and profits, and funneling an ever-increasing stream of cash back to unit holders.
In my mind, for the best-in-breed coal company in the United States, look no further than Alliance Resource Partners.
The article Are Any Coal Stocks Worth Your Money? originally appeared on Fool.com and is written by Robert Ciura.
Robert Ciura owns shares of Alliance Resource Partners, L.P.. The Motley Fool recommends Alliance Resource Partners, L.P..
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