For investors in James River Coal (JRCC), it’s been a long painful road. And most other coal stocks aren’t faring much better.
After peaking at nearly $60 back in 2008, JRCC stock is currently trading for about 35 cents as the coal producer has missed a critical debt payment and filed for bankruptcy. At the end of the day, JRCC has struggled against the back drop of low-priced and abundant natural gas as well as a tough regulatory environment for coal stocks.
That same struggle has been felt industry wide, and coal stocks are still sitting near historic lows, which may give some investors the idea to pull the trigger and load up on the hated sector.
Don’t do it — at least, not on the major coal producers like Peabody Energy (BTU).
The best place to find profits in coal stocks — along with hefty dividends — is the cheaply priced coal MLPs or master limited partnerships.
Many of the coal MLPs don’t actually mine the fuel source, but are paid a royalty rate as well as “right to mine” leases for the coal on their land. With zero real expenses, the coal MLPs are able to kick out hefty distributions to their unit holders.
For investors looking to play the continued dip in coal stocks, the MLPs are the only way to go. Here are three of the best picks.