Selling Coal, but Sticking with Resources

12/07/2009 3:36 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 (NYSE: NRP) out of the portfolio.

My choice was between selling this master limited partnership or Penn Virginia Resources (NYSE: 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.

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, see this recent 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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