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Coal production is on the decline in several parts of the world. As a result, some investors have considered coal stocks dead from a long-term perspective.However, this is far from true. Consumption of coal remains robust in many parts of the world, such as the emerging markets. And demand for coal has stabilized after many years of decline in developed nations.As a result, the following 2 coal stocks continue to pay high dividends to shareholders, making them attractive for income investors.
NACCO Industries (NC)
NACCO Industries is a holding company for The North American Coal Corporation, which was incorporated in 1913. The company supplies coal from surface mines to power generation companies.NACCO Industries is the largest lignite coal producer in the U.S., with annual production of 35 million tons, and ranks among the top ten of all coal producers. The company operates in the states of North Dakota, Texas, Mississippi, Louisiana and on the Navajo Nation in New Mexico.On May 16th, 2024, NACCO Industries raised its quarterly dividend 4.6% to $0.2275. On November 1st, 2024, NACCO Industries reported third quarter results for the period ending September 30th, 2024. For the quarter, revenue decreased 4.5% to $46.5 million while earnings-per-share of $2.14 compared favorably to -$0.51 in the prior year.Coal revenue was lower by 5.1% to $17.7 million while total tons delivered improved 1.3%. Unconsolidated coal deliveries grew 4.5% to 5.8 million tons while consolidated coal deliveries declined 24.5% to 474K tons. Deliveries from the North American Mining segment were down by 22% to 12 million tons while revenue grew 49% to $32.3 million.Mineral Management revenue grew 54% to $8.8 million due to significantly higher volumes. The company expects to generate significant positive net income in 2024 following a steep decline in earnings-per-share in 2023.NACCO Industries’ primary competitive advantage is that it does not acquire existing coal mines or mining companies, as this would increase its leverage position. Instead, NACCO Industries focuses on reducing coal production costs and maximizing efficiency and operating capacity at the mine locations.NACCO Industries has an admirable dividend growth record for a company in a declining industry, with 39 consecutive years of dividend growth. With such a long history of dividend increases, NACCO qualifies as a Dividend Champion. Given also the extremely low payout ratio of 18% projected for 2024, the dividend is likely to keep growing for several more years. NC stock currently yields 2.9%.
Alliance Resource Partners (ARLP)
Alliance Resource Partners is the first publicly traded Master Limited Partnership (MLP) and the second-largest coal producer in the eastern U.S. Apart from its primary operations of producing and marketing coal to major domestic and international utility users, the company also owns both mineral and royalty interests in premier oil & gas regions, such as the Permian, Anadarko and Williston Basins.On October 28th, 2024, Alliance Resource Partners posted its Q3 results for the period ending September 30th, 2024. For the quarter, revenues declined by 3.6% year-over-year to $613.6 million. Lower revenues were primarily the result of reduced coal sales prices, which fell 2.1% due in part to lower export pricing in Appalachia, and lower transportation revenues. Oil & gas royalties remained more or less flat.Net income came in at $86.3 million, or $0.66 per unit, compared to $153.7 million, or $1.18 per unit last year. In 2024, Alliance’s management expects another record-breaking year in terms of revenues, driven by a strong coal sales book that mirrors the success of 2023. More specifically, the company expects to sell about 34 tons of coal.In the face of substantial regulatory challenges and media scrutiny, Alliance stands out as one of the last major players in the coal industry, enjoying notable advantages. The ongoing conflicts in Ukraine and the Middle East, coupled with unprecedented economic sanctions, such as the EU’s ban on coal imports from Russia, are poised to maintain coal prices at above-average levels.Further, as the management sets its sights beyond 2024, they express optimism about the strengthening fundamentals of coal export demand and the emergence of opportunities in new markets.Thanks to its excessive profits and its cheap valuation, Alliance Resource Partners is currently offering an exceptionally high dividend yield of 9.8%. Given the decent payout ratio of 77% and the rock-solid balance sheet of the company, its dividend seems to be safe for the foreseeable future.More By This Author:10 Best Dividend Aristocrats You’ve Never Heard Of
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