Dividend Income Analysis: Alliance Resource Partners (NASDAQ:ARLP)


We assess Alliance Resource Partners (NASDAQ:ARLP), a dividend paying company in the Coal Production and Marketing industry to determine if it is a healthy dividend paying stock that investors should consider as a solid income generating addition to their portfolios or not. Alliance Resource Partners  is currently priced at $39.02 after moving down -0.69% in the previous day of trading. ARLP is currently paying an annualized dividend of $2.52 per share, translating to a dividend yield of approximately 6.43%.

Generally we would consider a stock paying a dividend greater than 80% of its earnings to be risky. This is due to the possibility that they will be unable to afford to pay the dividend in the future due to having no reserves and also not having cash reserves available for emergencies. Alliance Resource Partners (NASDAQ:ARLP) currently has a dividend pay out ratio of 42.00%, therefore we consider ARLP’s dividend to be relatively safe, in this respect.

The next assessment we perform is by determining the quick ratio of ARLP. The quick ratio tells us if a company will be able to cover all of its current liabilities with liquid assets on hand. As a rule of thumb a number of 1.0 or better indicates this is likely, meaning the stock’s dividend is less risky. Alliance Resource Partners currently has a quick ratio of 0.60, meaning it is in a potentially risky position.

Finally we look at the estimated earnings growth for Alliance Resource Partners Partners (NASDAQ:ARLP) over the coming 5 years. Generally if earnings are predicted to continue to grow, one can expect there to be continued earnings from which to pay dividends. Alliance Resource Partners has an estimated annual growth over the next 5 years of 10.86%. This means that it would appear ARLP should be able to maintain and grow their dividend.

Alliance Resource Partners (NASDAQ:ARLP) made their last dividend payment on Feb-13 and went ex-dividend on Feb-04.

Discussion2 Comments

  1. The author erroneously refers to Alliance Resource Partners LP (ARLP) as being in the oil and gas drilling and exploration industry. In fact, ARLP is a diversified producer and marketer of coal primarily to major US utilities and industrial users.

    We would appreciate it if the author corrected this error.

    Best regards,

    Brian L. Cantrell
    SVP & CFO

    • Thank you for pointing this error Brian. We strive for accuracy and apologize and as such have ammended accordingly.

      Thanks again,

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