June 18, 2009 - Allied Resource Partners, L.P. (ARLP-NASDAQ) engages in the production and marketing of coal for utilities and industrial users in the United States. It offers low, medium, and high-sulfur coal.

Further, it offers ash and scrubber sludge removal, coal yard maintenance, and arranging alternate transportation services. As of December 31, 2008, Alliance Resource had approximately 686.3 million tons of coal reserves in Illinois, Indiana, Kentucky, Maryland, Pennsylvania, and West Virginia. Alliance Resource Management GP, LLC is the general partner of Alliance Resource Partners, L.P. The company was founded in 1971 and is based in Tulsa, Oklahoma.

Let's start right out with what caught my eye: 8.10% yield. That's quite a return, especially when most stocks that have a dividend yield about 2.5%. Of course, as a limited partnership, most of the earnings are distributed to shareholders, as with any limited partnership. Still, that's a hefty dividend for investors seeking income. (Remember, as with all limited partnerships, tax filing may be delayed because of late tax information from L.P.'s. Whether this has ever been the case with ARLP, I don't know, but it's one of the considerations when investing in any limited partnership.)

Earnings were doing fine until last year when they took a noticable hit. In 2006, they were $3.03 a share, then $3.05. In 2008, they dropped to $2.41. This year, the consensus by 8 analysts is for $5.08, then $5.28 next year. The range for this year among the analysts is $4.13 to $6.00, then $4.30 to $6.55 for 2010. Quarterly numbers, due in July, are expected to be $1.21 vs 68 cents last year in the same period. For the September quarter, look for $1.05 compared to 48 cents last year in the same quarter.

The first quarter showed great improvement with revenues up 16% compared to the first period of last year. That was mostly due to an increase in spot prices for coal by 26%. That helped offset the 8% decrease in volume. The first quarter showed earnings of $1.56, 68% higher than last year's first period.

The company believes an economic recovery will start in the second half of the year. It's projected volume for all of 2009 at 28.5 million to 29 million tons, in anticipation of a mild upturn. That would be an increase of 7.5% to 9.5% from last year's coal production. Investors can rest somewhat easy in the profit projections for this year since 90% of Alliance's volume is contractually priced which should mitigate most, if not all, downside pricing risks.

Revenues grew consistently over the last 3 years, going from $967.6 million to $1.033 billion to $1.156 billion last year. This year, the consensus among analysts is for $1.35 billion, then $1.52 billion for 2010. With operating efficiencies continuing to improve, thanks to facilities upgrades, those increased revenues will translate into better earnings going forward.

More numbers: Market Cap is $1.24 billion. Forward p/e is 6.4. Price to Book is 2.06. Operating margin in the last 12 months was 14.85% with a Profit margin of 13.6%. Return on Equity was a remarkable 51%. Total cash is $211.97 million for cash per share of $5.78. Total debt is $459 million. Current ratio is 2.27. Book Value per share is $16.82. 52-week low was hit on November 21, 2008 at $17.39. The high was June 24, 2008 at $58. There are 36.6 million shares outstanding with a float of 36.07. Insiders own 44.11% of the stock. The dividend is $2.92 for a yield of 8.10%.

Look deeper into this coal producer if you think the commodity will only get pricier. This is a well managed company with lots of coal in the ground. When the economy recovers, you can take all the above numbers higher.

- Company Web site: www.arlp.com

- Ted Allrich