The coal companies stocks fell drastically in the past few years. It was due to a decrease in the demand for it. Many of the small manufacturers had to exit the business. Because of this declining demand trend. And if it continues further, more of the companies will also go out of the business. There are heavy regulations imposed in this sector. It is due to be hazardous to the environment. Also, lives remain at stake while mining. For this reason, many of the small business strive to survive. But, in the end, they are unable to cope up.
In the previous year, 2016 coal industry made a huge profit. It helped to increase the stock prices of many coal companies. In this article, I will talk about the best coal companies in which you can invest. Not only this, I will also talk about the greater returns you can achieve from them. There are many countries that produce coal. Among which China is on the top, followed by USA, India, European Union, and Australia. Also, other countries like Indonesia, South Korea, Canada, and Japan produce it too. From this, you can assume that coal is one of the largest investment in fossil fuels.
Types of Coal
Before putting your money in coal companies stocks, you must know what are the types. There are two major forms. First one is Thermal coal and the second one is Metallurgical coal.
- Thermal coal: It is also known as steaming coal. The type helps in the production of electrical power. The manufacturers ground the coal into the powder that is as fine as caster sugar. Since it is so thin and tiny it catches fire more quickly. It helps in generating electricity. The quantity of ash is higher in it. For this reason, it is used in cement, paper, or chemical industries. Large boilers heat with the help of this and produce electricity. The main producers and exporters are China, Australia, USA, and Indonesia. The global market is stable, so the demand for the product is growing at a slower rate.
- Metallurgical coal: It is also known as coking coal. The type helps in the production of steel. The manufacturers put the coals into the oven and burn it up to 1100 degrees Celsius. By burning them in this temperature they become pure carbon. And when the liquid carbon cools it becomes a chunk of solid carbon. It is then can be used in the blast furnace to make steel. The main producers and exporters are Australia, USA, and Canada. The global market is declining with the declining demand for steel.
What are Coals used as in today’s time?
By knowing the type of coal is not enough. You must know where they are used for investing in coal companies stocks.The usage of coal is now far more technologically advanced. Typically the coal helps in the generation of electricity for factories. But with advanced Technology, it is able to make steel. Also, many manufacturers use this in their heating process as coal is combustible.
Another form of usage is coal classification and coal liquefaction. They help in the production of Methanol and Ethylene.It is further used in the production of fertilizers and plastics. Further, coal produces activated carbon that is a major part of the dialysis machine. And the byproducts of the coal are used to build bridges and vehicles. Also, it helps to make carbon fibers and silicon metals. Both of which are equally necessary.
Top Coal Companies Stocks
There are chances that the regulations imposed on the coal industry will lessen in the upcoming years. So, it will be a wise decision to start investing in the coal companies stocks. As in future, there will be greater return. There are some of the most popular coal manufacturing companies in which you can invest. I have gathered some of the best ones below.
Cloud Peak Energy Inc. is one of the largest coal production company. The main work location is Powder River Basin. They collect low sulfur coal for their production. According to S&P 500 the companies credit rating has increased. They were in the category of SD and now it is in B-. Also their unsecured notes credit rating improved from D to CCC. It shows that the company is in a speculative position. Also, they are able to meet their financial obligations which are a positive sign. If the company is able to reduce their debt, their credit rating will improve further. It will help to increase the market price of the stock.
The company’s performance is very weak, but it managed to keep a positive operating cash flow. For any company managing the operating cash flow is an importing thing. It is a difficult task to keep it positive. So, you must not overlook this if you are investing in coal companies stocks. The company is not issuing any new shares, so this is a good news. If the number of outstanding shares increases than the price of the shares decreases. Also, the number of owners increases. Since the shares price is not getting diluted, it is a good company to invest.
BPH Billiton Limited is one of the largest coal mining company. It produces both Thermal coal and Metallurgical coal. They also mine other natural resources in Australia, it does not rely solely on coal. The company is a strong one and investing in it will turn out to be fruitful. Their main target customer is Asian people. Their corporate credit rating dropped from A+ to A. Also, their subordinated bonds credit rating fell from A- to BBB+. Even though there were inflation and economic downturns, the company managed to survive.
According to their calculation, their operating income per share will double. As the present condition is moving into a favorable direction. The company has a good dividend policy. So, investing in it assures you that at the end of the fiscal year you will receive a dividend. BPH was able to maintain a strong Balance Sheet and it is evident in the coal industry. The credit downgrading was not the company’s fault. It was due to the fall in the price of the commodities and the sudden slow in the Chinese economy. People who are looking for good coal companies stocks then you should invest here. Also, their dividend policy is great.
Consol Energy Inc. is a company that produces coal oil and gas. The coal they mine is for thermal coal use. Their unsecured debts credit ratings increased from B to B+. It is a very good sign for the company as it was not doing well in the past. Also, their secured debts rating also increased to BB from BB-. Further, there were other changes too. Corporate Family Rating improved to B1 from B2. And the Probability of Default Rating to B1-PD. Not only this, their Speculative Grade Liquidity Rating upgraded to SGL-1. The S&P500 is positive that the company will do better. The company is planning on reducing their debts to upgrade themselves further.
If the company can sustain and move forward then they are going to make more profit. As we all know higher profit means a higher return for the shareholders. So, it is the best time to invest in this company as they are in a very good position. Consol has two financial covenant. It shows even if they are bankrupt, they will receive loan immediately to revive their company. People who are looking for coal companies stocks to invest in must think about it.
Arch Coal Inc. is a coal mining company that is in America. They produce both Thermal coal and Metallurgical coal. they supply their product in their home country as well as foreign. They have around 32 active mines for their continuous production of coal. According to S&P500 credit rating policy, the company improved. It is titled as a stable company. The Corporate Family Rating improved to B1 and the Probability of Default Rating to B1-PD. Not only this, their Speculative Grade Liquidity Rating upgraded to SGL-1.
From this, you can understand that the company has a strong reputation in the coal industry. Not only this, they are titled as the leading producer of Metallurgical coal. Also, they are the second largest of Thermal coal producer. 10 of their mines are low-cost mines which improve their net income. As you know an increase in net income means higher chances of receiving higher dividends. The market price of the shares of this company is improving. If you want to invest in coal companies stocks then this is another great choice. They produce products that cause lesser harm to the environment.
Westmoreland Coal Company mines coal and trades it globally. The company’s operating profit improved. It has a good consensus rating. The company is less risky to invest in as it is 15% less volatile than recorded in S&P500. It is a challenging condition now for the company. But it is able to cope up with it. The Global Rating decreased from B to CCC+. There are chances that the regulations may lessen. It is possible that the prices of coal will go up. Investors should invest when the price is low. The company may seem like it is in a tight position. But, it will improve once the economic condition and inflation improve. It is a good opportunity for those who want to buy shares and sell it when the price goes up.
6. Rio Tinto
Rio Tinto is a natural resource mining company in which coal plays a major part. It mines both Thermal coal and Metallurgical coal. There was a fluctuation in the price of the commodity. But now it has become stable. Since the coal market is volatile now, the company has decided to cut off their debts. It will show a positive reflection in the S&P500 credit rating. they may even upgrade the company’s status. The credit rating of the company is A-, which is very impressive. If you keen to invest in coal companies stocks, this is a good one.
The company’s earnings per share are $2.55. This means their net income is enough to pay out a good amount of dividend to the shareholders. Investors should consider their dividend payout ratio, it is 4.65%. Rio is planning to improve its debt maturity profile. Also, they have very strong Balance Sheet that suggests that the company is credit worthy.
South32 Ltd. was once a part of BHP Limited. But now they work as an independent company. They were known as BHP Coal Holdings. It mines and produces both Thermal coal and Metallurgical coal. The company had a rough beginning in 2020. But as time went by, it took an upward turn. Their net income increased. They are now able to pay dividends at 3.03%. Also, it is expected that the rate of the dividend will increase over time. This is a prospective company for any investors to invest.
Alliance Resource Partners Ltd. mines and produces coal for industrial use. If you want to invest in coal companies stocks, then this is one of the best choices. It pays it shareholders $2 per share as dividend. The company has a dividend yield of 10.9% which is a very good return to any investor. They have a strict policy to always keep their shareholders happy. It is done by giving away 48.4% of their earnings to them. The company is making a huge amount of profit, it is evident in their Income Statement. Also, their Balance Sheet is strong. The Return on Equity and Return on Asset is in a good position.
According to S&P 500, their stock price is around 30% less volatile. So, it is the best time to invest as the price will soon go up. So, if you are up for taking risks, this is a great choice. You can sell off the shares to get a gain as soon as the price rises. Also, it is expected the company’s profitability will increase. Since they pay 48.4% of their earnings to the shareholder the dividend payout will also improve.
Rhino Resources Partners LP is a company that produces coal. It operates in the United States of America. The company producesMetallurgical coal. As the coal market is improving so is the status of the company. Potential investors of coal companies stocks should look forward to this. The price of the shares is low now. It will rise in the near future. So, buying the shares right now would be the wiser decision. Not only this, if you are a speculator you can sell off the shares when the price is right. Also, you can wait for the fiscal year to end to receive dividends.
The company’s main motive is to provide safety to its worker. Also, they are abiding by the regulations imposed. The company has low debt level, which proves that they are not too much obligated by the creditors. It is a good indicator of a strong Balance Sheet. Also, they are able to good amount of dividends to the existing shareholder. Not only this, they are willing to increase their revenue by selling more to coal. It will help to increase the profitability of the business.
Natural Resource Partners LP is a diversified mining company. It specializes in selling coal, soda ash, and other natural resources. The company has good consensus rating. If you want to invest in coal companies stocks, then this is one of the best choices. It pays it shareholders $1.80 per share as dividend. The company has a dividend yield of 7.2% which is a very good return to any investor. They have a strict policy to always keep their shareholders happy. It is done by giving away 54.2% of their earnings to them. The company is making a huge amount of profit, it is evident in their Income Statement. Also, their Balance Sheet is strong. The Return on Equity and Return on Asset is in a good position.
According to S&P 500, their stock price is around 35% less volatile. So, it is the best time to invest as the price will soon go up. So, if you are up for taking risks, this is a great choice. You can sell off the shares to get a gain as soon as the price rises. Also, it is expected the company’s profitability will increase. Since they pay 54.2% of their earnings to the shareholder the dividend payout will also improve.
Tech Resources Ltd. is a natural resource mining company in which coal plays a major part. It mines coal as well as other natural resources. The company operates in Canada. It is a positive investment for coal companies stocks investors. At present, S&P 500 says it is a stable company. It has Corporate Family Rating of Ba2 which was Ba3. And the Probability of Default Rating improved to Ba2-PD from Ba1-PD.Also. the Speculative Grade Liquidity Rating upgraded to SGL-2.
Assumptions say that the price of the shares will go up till $42. At the moment, the price is lower. So, it is wise to buy the shares right now. The dividend per share is $1 and the company is making good anamount of revenue. It shows how much strong the company’s profitability is. Not only this, it also has a strong balance sheet. Tech made tremendous growth this year. So, the potential buyers should look forward to buying the stocks of this company. It will give a higher return.
12. Peabody Energy
Peabody Energy is mining company that produces both Thermal coal and Metallurgical coal. The company is titled as the best coal selling company in 2020. Potential coal companies stocks investors should invest in this as it excelled in everything. It provides a healthy working condition to its workers. Also, it tries its best to maintain and abide by the regulations. The company is sustaining this title for a long time. According to S&P 500, it is a stable company. The company managed to earn Corporate Family Rating of B1. The Probability of Default Rating improved to B1-PD. The company has a huge amount of cost competitive assets which help them to cut cost. It led them to become more profitable overtime.
The share price of the company may rise. So, the potential investors should look forward in buying the company shares. The earnings improved which shows that there are chances that they will pay dividends. Many estimators suggested that this company will have a downturn. But, amazingly enough, it is now in the third position with positive earnings per share. Further, it is moving upward at a higher rate. So, buying the shares right now would be the wiser decision. Not only this, if you are a speculator you can sell off the shares when the price is right. Also, you can wait for the fiscal year to end to receive dividends.
In the end, I would say investing in coal companies stocks are a profitable investment. It is not necessary that you have to invest in one company. You can make a portfolio of different companies to reduce the risk. All the above companies have high potential to give a good return to the investor. So, do not wait for long buy the shares of the company when they are low in price. And then you can sell them out when the time is appropriate for you. In this way, you can gain in the short-run. But, if you planning for the long run than the best thing to do is hold the shares. After the fiscal year of the company completes, it will give you dividends in return. Further, some companies provide an interim dividend, that is they pay twice a year. So, you should also consider that while buying.