Income is a big part of investors' returns. Stocks, mutual funds and fixed income ideas in this column are featured because they are relatively solid in their ability to pay dividends or interest. We're giving income investors a resource to start their research for investments that give better yields with lower risk.

September 15, 2010 - Penn Virginia Resource Partners, L. P. (PVR-NYSE) engages in managing coal and natural resource properties; and gathering and processing natural gas in the United States. The company operates through two segments, Coal and Natural Resource Management, and Natural Gas Midstream.

The Natural Gas Midstream group provides natural gas processing, gathering, and other related services. It owns and operates natural gas midstream assets located in Oklahoma and Texas consisting of 6 natural gas processing facilities having 400 millions cubic feet per day of total capacity and approximately 4,118 miles of natural gas gathering pipelines. This division also owns interests in a joint venture that gathers and transports coalbed methane in Wyoming's Powder River Basin. The company was founded in 2001 and is based in Radnor, Pennsylvania.

Earnings were volatile the last 4 years. In 2006, they hit $1.74, then dropped to 96 cents, only to recover to $1.64. Last year, they dropped again to 76 cents a share. This year, expectations are for 90 cents and next year 95 cents. Whether those numbers can be reached depends on the weather. The colder the winter, the more gas and coal is burned. This is a seasonal business and if temperatures stay above normal in the winter months, revenues and profits fall.

In the second quarter, even with volume a little higher, operating profits were lower because gross margins narrowed. Don't expect too much of an improvement in the third period as the slow economy is hurting natural gas consumption, especially in manufacturing. On the plus side, coal consumption is rising. Electric utilities are burning more of it, with much of that demand coming from China and India. The U.S. utilties are also buying more. Volumes of coal increased in the second quarter as did pricing and revenues.

This stock (limited partnership actually) is all about the dividend. It's $1.88 for a yield of 7.7%. That's a very attractive return when most stocks are averaging a yield of about 2.3% and when CD's for 1 year and under are trying to break through 1%. Of course, the risk is much higher here as those volatile earnings would suggest. The reason this dividend should be relatively safe is the high cash flow the company generates. The partnership has a record of increasing the dividend every year since it went public in 2001, going from 92 cents a share to its current level of $1.88.

More numbers: Market Cap is $1.27 billion. Trailing P/E is 23. Price to sales ratio is 1.72. Price to book is 2.81. Book value is $8.66. Operating margin for the last 12 months was 14.31% and Profit margin was 10.87%. Return on equity was 16.87% and Return on assets was 5.48%. Revenues were $739.14 million. Total debt is $656.93 million. Debt to equity is 1.43. Current ratio is 1.13. Beta is .80. In the last 52 weeks, the stock is up 53.12% compared to the S&P 500 index gain of 6.50%. There are 52.29 million shares outstanding. The Float is 32.10 million. Insiders own 39.42% of the stock. Institutions have 14.40%.

PVR is an investment in coal and gas. If you believe both these resources will continue to be staples for the global economy, it should appeal. But you'll need to follow prices for these two commodities since they drive revenues and profits for this limited partnership. Oh, and keep an eye on the weather.

- Company Web site: www.pvresource.com

- Ted Allrich