Natural Resource Partners LP (NRP) Moves Into Bakken

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Yield Today, Distribution Growth Tomorrow

Even if Natural Resource Partners LP (NYSE:NRP) does not increase its distribution for the next two years, it’s still an attractive investment. The company has over $100 million of cash on the balance sheet, enough to cover two quarters of distributions. The risk of a distribution cut is extremely low. An increase in the company’s distribution rate is unlikely this year, but Natural Resource Partners LP (NYSE:NRP) expects to reignite distribution growth as soon as prudently possible.


If next year a third of revenues comes from diversified sources and the remainder from coal-related sources, the distribution yield investors demand should decline. If one ascribes a typical MLP yield of 6% on the company’s non-coal related revenues and a 9% yield on the rest, that implies an 8% overall yield. At 8% on a flat $2.20 annual distribution, that suggests a unit price of $27.5 and a total return of 32% over a 1-year time horizon.

Peter Epstein owns units of Alliance Resource Partners, L.P., and Natural Resource Partners LP (NYSE:NRP). The Motley Fool recommends Alliance Resource Partners, L.P..

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