The Best Coal MLPs #2 — Rhino Resource Partners (RNO)
Distribution Yield: 12.8%
Unlike NRP, rival Rhino Resource Partners (RNO) does most of the mining on its properties. Also unlike NRP and several other coal stocks and MLPs, RNO isn’t diving head-first into natural production.
In fact, the company is selling its natural gas stakes.
At first blush that may seem like a bone-headed idea. After all, natural gas is the future. Yet, it’s actually pretty darn smart for the MLP’s unit holders.
JRCC’s bankruptcy and the woes of many coal stocks have been a result of high debt loads. Many miners added exposure at just the wrong time and now are struggling to right their ships. However, by selling its gas assets, RNO is now basically debt-free.
For shareholders of RNO, that does two things. First, it makes that 12.8% dividend a bit safer to own, as any money going towards debt reduction can now be plowed back into investors’ pockets. At the same time, the sale allows RNO the ability to look for opportunities to expand in both coal and other energy assets. JRCC had some good assets, and snagging them at fire-sale prices would be a good deal for RNO.
Investors seem to like the firm’s prospects and debt-reduction moves. Shares of RNO have risen about 11% in the past month.