Sell Natural Resource Partners (NRP)

12/07/2009 3:03 pm EST


Jim Jubak

Founder and Editor,

I’m going to move to reduce the exposure of my Dividend Income Portfolio ( ) to the natural resources sector by selling coal-mining master limited partnership Natural Resource Partners (NRP) out of the portfolio. My choice was between selling this master limited partnership or Penn Virginia Resources (PVR) and I decided to stick with Penn Virginia because the company’s gas distribution, coal-bed methane, and timber assets give it a more diversified blend of natural resources businesses than Natural Resource Partners.

So why sell Natural Resource Partners?

 Part of this sell decision is a timing call: It looks like the natural resource sector of the stock market could be due to rotate out of favor. (For more on that se my post ) Part of the decision is company specific, though. The company has seen debt rise in the third quarter. That, plus coal volumes that, in the third quarter were down 28% from the third quarter of 2008, will make it hard for the company to increase distributions by more than a few cents a unit in 2010.  I’m selling these units out of my Dividend Income Portfolio with a 60% drop in price since I purchased them on September 6, 2005 but with a total loss, including $1,553 in dividends, of 44%. The company paid its third quarter dividend on November 13. (Full disclosure: I will sell my units of Natural Resource Partners three days after this column is posted.)

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