If you didn't get a lump of coal in your stockings, then maybe buying some coal is a good idea now. Alliance Resource Partners, L.P. (NASDAQ:ARLP) supplies coal predominantly to utilities (91.8%) and the rest to industrial users in the U.S. The Motley Fool notes that it always raises its dividend. I find it more important that regular dividends are paid consistently than insisting on having dividends increase every time (or even regularly), but it certainly is a positive aspect of this stock. ARLP's accounting practices appear quite good, with a high forensic accounting score. Kapitall recently posted that ARLP is a company with conservative accounting practices.
On the macro side of the equation, coal does not seem to have as many problems as it did a few years ago, which was one reason that I shorted FreightCar America (NASDAQ:RAIL) back then. With unemployment high, the attention to pollution from coal has taken a back seat. The BP oil blowout did not help oil drilling and production here, and thus, conversely, electricity companies will continue to rely on coal for the foreseeable future. The macro view of the economy has picked up, and energy consumption -- along with commodities -- will be part of this increased demand. Investor's Business Daily thinks that ARLP is too thinly traded, but overall rates it and its partner Alliance Holdings (NASDAQ:AHGP) as excellent choices.
Sabrient Systems rates ARLP as a Strong Buy, and states:
Sabrient rates ARLP a Strong Buy for its superior scores for growth, value and momentum, three important metrics that indicate future market outperformance.
• Momentum: ARLP boasts a Sabrient Momentum Score of 94.2. The score is a composite of price, earnings and group momentum, and backtesting reveals that stocks with high momentum scores typically continue their bullish behavior at least in the very short term. However, high scores carry the risk of trend reversal due to group strength deterioration, market gyrations, or failure to meet earnings projections.
• Growth: Also, an impressive 87.0 for the predictive Sabrient Growth Score is a reflection of the company's high earnings growth potential.
• Value: ARLP scores 81.3 for the Sabrient Value Score. A value score in this range means the stock is undervalued at its current price.
When choosing stock selections for my portfolio, I pay particular attention to the scores of earnings, balance sheet and fundamentals. If it is a good selection for me, then it should have at least one score that is outstanding in the ratings. For ARLP it has outstanding fundamental score traits with a score of 93.3 (out of 100), compared to an industry average of 41.5 and S&P400 of 50.2. Such scores are a broad measure of a company's financial health, including its balance sheet, cash flow, revenue, and earnings quality.
ARLP is an outstanding value play and should provide excellent dividend returns for years. Trade Radar Operator provides some other good information about ARLP here.
Disclosure: I am long ARLP.