Daily Stock Tip: Alliance Resource

This week, I'm looking for the sixth basic materials representative of nine for my Ivy portfolio.

The materials sector has thirteen industries all related to mining, making, and delivering essential commodities. They are: agricultural inputs; aluminum; building materials; chemicals; coal; copper; industrial metals; steel; paper; silver; specialty chemicals; gold.

Today I'm reviewing a mid-cap coal company named Alliance Resource Partners LP. Their trading ticker symbol is ARLP.

Alliance Resource Partners LP operates as a coal mining company based in the United States. It functions through two segments; Illinois Basin and Appalachia.

The Illinois Basin activity comprises of underground mining complexes in Illinois, Indiana, Kentucky, Maryland, and West Virginia and it makes up for most of the company's revenue-generating operations.

The Appalachia segment, on the other hand, consists of multiple operating segments, including the Mettiki mining complex, the Tunnel Ridge mining complex and the MC Mining mining complex.

Alliance Resource Management GP, LLC serves as the general partner of the company. The company was founded in 1971 and is based in Tulsa, Oklahoma.

I use three key data points to gauge dividend paying equities or funds like Alliance Resource Partners LP:

(1) Price

(2) Dividends

(3) Returns

Besides those three, several other keys will finally unlock an equity or fund in which to invest.

Those first three primary keys, however, best tell whether a company has made, is making, and will make money.

ARLP Price

Alliance's price per share closed at $16.90 yesterday. A year ago its price was $18.90. Price fell $2.00 or about 10.6% in the past year.

Assuming Alliance's stock trades in the range of $14.00 to $24.00 this year, Alliance's recent $16.90 price could rise by $2.10 and go to $19.00 by mid-June, 2020.

ARLP Dividends

Alliance's most recent quarterly dividend was $0.535 paid May 15th.

That $0.535 Q payout equates to an annual dividend of $2.14 which produces a yield of 12.66% based on yesterday's $16.90 closing price.

Gains For ARLP?

Adding the $2.14 annual estimated dividend to my $2.10 estimate of Alliance's price upside shows a $4.24 potential gross annual gain, per share, which will be reduced by costs to trade those shares.

Say we pay a little under $1,000.00 today at the $16.90 recent stock price would buy 59 Alliance Resource Partners LP (ARLP) shares.

A $10 broker fee paid half at purchase and half at sale will cost us $0.17 per share.

Subtract that $0.17 brokerage cost from the estimated $4.24 gross annual gain leaves a net gain of $4.07 X 59 shares = $240.13 or a 24% net gain on a $997.10 investment.

Therefore, Alliance Resource Partners LP whose trading ticker symbol is ARLP, now shows a possible net gain of 24% including a 12.66% dividend yield.

Four brokers track Alliance Resource Partners LP stock:

ARLP shares

One says ARLP shares will "outperform" peers

Their consensus recommendation is to "buy" ARLP.

Therefore, you can look at Alliance Resource Partners LP and see it has made money, is making money, and could net a 24% gain including a 12.66% dividend yield. It could be more, it could be less.

The above speculation is based on past year performance. The actual results remain to be seen to determine if Alliance Resource Partners LP is worth your time and money.