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I'm Not Buying The Panic, This 9% MLP Yield Is Secure

Published Tue, 26 May 2015 22:30:45 -0400 on Seeking Alpha

Alliance Resource Partners (Nasdaq: ARLP) has seen a stunning decline over the past year. Units of this coal Master Limited Partnership are down 35% in the past year, while the S&P 500 Index is up 10% in the same time. As an investor, obviously I'm greatly disturbed by such a steep fall. But I believe Mr. Market is once again panicking, in all-too-familiar fashion. Fundamentally, Alliance Resource remains a sound company, with a low-cost business model that generates strong profits.It seems the market is pricing in a truly disastrous scenario for the coal industry as a whole. But within the coal industry, there are winners and losers. I believe Alliance Resource is a winner in the coal space, with a prosperous future ahead of it, and that Mr. Market is throwing away the baby with the bath water.Mr. Market Is In Full-Blown Panic ModeObviously, Alliance Resource has sold off lately on concerns about the coal industry more broadly. Coal is facing a number of headwinds. Among these, coal is getting hit by enhanced regulatory and public scrutiny for its environmental and public health effects. In addition, cheap natural gas is an added headwind for coal, because it incentivizes industrial end users like utilities to switch over to natural gas. And the price of coal has indeed declined over the past year.These factors have had a disastrous effect on the coal industry more broadly, and several coal companies are either in, or nearing, bankruptcy. For example, Patriot Coal has filed... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
ALLIANCE RESOURCE PARTNERS L.P. 15.86   4.5 3.49 2.16 12.95


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