Kinder Morgan Energy Partners LP (KMP), Natural Resource Partners LP (NRP): Pipeline Giant Signals It’s Time To Buy Coal

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That said, there are positive signs in the industry. For example, Arch Coal Inc (NYSE:ACI) recently noted that there are plans to build over 500 gigawatts of coal-fired energy capacity around the world by 2018. That much capacity will require an addition 1.5 billion tonnes of coal. And, based on current industry trends, coal stockpiles at U.S. electric plants should be at normal levels by the end of 2013. So there’s a reason to believe that both near-term and long-term demand will improve.

Opportunistic

Kinder Morgan Energy Partners LP (NYSE:KMP) has an impressive history of success. Although the top and bottom lines tend to be volatile because it is a limited partnership, its dividend, which has increased each year for the last decade, tells the true tale of consistency that underlies its business. With a yield of around 6% after a recent industry-wide sell off, now would be a good time for investors to consider a purchase.

And that has nothing to do with the coal venture. That said, its size and financial strength make the move into coal a relatively safe way for investors interested in the space to get involved. More aggressive types might want to consider Natural Resource Partners LP (NYSE:NRP), which shares the leasing model.

A Coal Survivor

Alliance Resource Partners, L.P. (NASDAQ:ARLP) might be a more appropriate option for investors interested in a focused coal offering that are put off by Natural Resource Partners LP (NYSE:NRP) high yield. Although Alliance Resource Partners, L.P. (NASDAQ:ARLP) both owns and operates its mines, taking on notable safety and regulatory risks, it has an impressive performance history.

In fact, the company reported record results in 2012 because it was able to grow its production enough to offset the weak pricing environment. It expects to post record results in 2013, too. What makes Alliance Resource Partners, L.P. (NASDAQ:ARLP) so interesting, however, is that it continues to invest in its business. When coal prices recover, the partnership’s results will get a double boost.

Alliance Resource Partners, L.P. (NASDAQ:ARLP)’s impressive results haven’t gone unnoticed by the market. It recently yielded around 6.3%. That’s still a notable yield from one of the industry’s top performers. Moreover, the company has continued to increase its dividend through coal’s malaise. Those seeking a direct coal play would do well to look here.

A Sign

Kinder Morgan Energy Partners’ move into coal is a sign that investors shouldn’t ignore. While the most conservative should rest comfortably knowing that Kinder is making an opportunistic move on their behalf, more aggressive types should consider direct plays like coal lease company Natural Resource Partners and top-notch coal miner Alliance Resource Partners, L.P. (NASDAQ:ARLP).


Reuben Brewer has a position in Natural Resource Partners. 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 Pipeline Giant Signals It’s Time To Buy Coal originally appeared on Fool.com is written by Reuben Brewer.

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