No one denies the long-term trend of natural gas and renewables taking more market share, but coal is still a dominant fuel source, explains income expert Bryan Perry, editor of Cash Machine.

The number of players in the coal space has been reduced dramatically to where those that have endured the downsizing of the industry are reaping some nice margins from less competition, while exports are climbing due to the global economic reflation.

So, just as it seems as though nobody is really looking at coal as a serious investment theme, I am. America still runs on 30% coal and there are a few dominant players that have that 30% under their control after massive consolidation.

For my latest featured stock, in fact, I’m going back to a company that Cash Machine recommended in April 2009 that we sold in November 2010 for a fantastic 110% profit.

That same stock that we bought for $30.08 and sold for $63.26, including dividends, is now selling for $23. I think it has the potential to trade to $45 if the first-quarter results offer any kind of a trend.

No one need look any further than America’s very best coal operator in the business — Alliance Resource Partners LP (ARLP). The company just hit first-quarter earnings right out of the ball park, earning $1.10 per share versus estimates of $0.68 per share. That’s an upside beat of $0.42 or 61.8%.

And this isn’t a “one-off” situation. Alliance Resource has blown past earnings estimates for the prior three quarters by 54.8%, 24.7% and 49.10%, respectively.

In Q1 2017, ARLP reported $461.1 million in revenue, an 11.1% increase compared to the year-ago quarter, by selling 9.6 million tons of coal, a 28.8% increase.

Going forward, Alliance’s sales contract position has gotten stronger, as the company has now secured volume and price commitments for approximately 35.5 million tons in 2017. That amount includes another 342,000 tons of 2017 shipments into the thermal and metallurgical export markets.

There is predictable cash flow to easily support the $1.75 current annual distribution payout that translates to a current yield of 7.70% and a payout ratio of only 63%, leaving room for future dividend hikes if the company continues to perform at that same level. Let’s get on the coal train.

The company benefits from its sales contracts that have locked higher prices under longer term contracts, while the rest of the spot market has seen coal prices come down by 15%.

Aggressive cost reductions have lowered operating expenses by 23% for the same period, demonstrating superior execution of a business that saw net income rise by 121.7% to $104.9 million.

At its current pace, the company has the potential to deliver earnings north of $4.00 per share. If we attach a price-to-earnings ratio of 10-12 times earnings, the stock would trade at $40-$45, not including dividends.

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