Unearth Profits From King Coal With Mine Safety Appliances

Coal is enjoying a massive surge in usage in emerging-market nations such as China, India, and Russia. For Fools who want to get in on the action, Mine Safety Appliances (NYSE: MSA  ) is an appealing choice that profits when the coal sector is strong, but doesn't collapse when it is weak.

Mine Safety produces equipment used in mining, national security, fire service, and construction operations around the world, giving it both product and geographic diversity. The company has surged in recent market action while the share prices for major coal companies such as Peabody Energy (NYSE: BTU  ) and Arch Coal (NYSE: ACI  ) , along with the exchange-traded fund for the coal sector, Market Vectors Coal (NYSE: KOL  ) , have all plunged over the past year.

KOL Chart

KOL data by YCharts

Value, growth, and income in one stock
It's difficult to find one stock that meets the objectives of growth, value, and income investing, but Mine Safety does. Earnings-per-share growth has increased for the past five years, year, and quarter, which is a very bullish trend for Mine Safety because of economic growth around the world. The forward price-to-earnings ratio is also solid at just 13.

Metric

Mine Safety Appliances

Peabody Energy

Arch Coal

EPS Growth, Past 5 Years

1.62%

12.18%

(16.26%)

EPS Growth This Year

81.16%

28.04%

(23.75%)

Projected EPS Growth Next Year

20%

4.47%

(53.30%)

Forward Price-to-Earnings Ratio

13

15.48

-

Source: Motley Fool CAPS.

In addition to the superior growth and income valuations, Mine Safety pays a sturdy dividend. The dividend yield is about twice as high as Arch Coal's or Peabody Energy's and 50% more than that for the average member of the Standard & Poor's 500 Index. A favorite of Motley Fool Income Investor, the dividend of Mine Safety has been increased annually for more than 40 years.

Metric

Mine Safety Appliances

Peabody Energy

Arch Coal

Market Vectors Coal

Dividend Yield

3%

1.30%

1.50%

1.90%

Dividend Payout Ratio

45%

10%

 --  --

5-year Dividend Growth Rate

5.18%

7.79%

8.87%

25.68%

Source: Motley Fool CAPS.

Global and product diversity
Mine Safety also has a broad product and geographic business model. Sales are divided into three regions, with North America making up almost half of the total. The biggest grower, by far, has been international sales to Asia, Africa, and Latin America. About two-thirds of coal is consumed in Asia, where the great bulk of global growth will most likely take place, particularly when India and China reignite their economies. That situation allows for shareholders to profit from the growth of Mine Safety in many different markets around the globe, including the fastest-expanding ones with the biggest populations.

Metric

North America

International

Europe

Total Yearly Sales

$464 million

$261.1 million

$251.1 million

Percentage of Total Sales

48%

28%

24%

Increase from Previous Year

7%

20%

(3%)

Source: Motley Fool CAPS.

Further diversifying the business model and protection for investors are the product segments. The three main units -- industrial head protection, portable gas detectors, and self-contained breathing devices -- constitute almost 80% of the sales. Usage, wear and tear, and regulatory requirements ensure that sales are ongoing.

Not sure about Elvis, but King Coal will be back
Since 2000, coal consumption has risen faster than that for any other fuel, according to the World Coal Association. When global growth reignites, there will be a greater demand for oil -- and when oil prices rise, coal will become even more attractive as an energy source. Mine Safety will light up the portfolios of its shareholders will a glowing total return as a result.

There are many different ways to play the energy sector, and our analysts have uncovered an under-the-radar company that's dominating its industry. This company is a leading provider of equipment and components used in drilling and production operations and poised to profit in a big way from it. To get the name and detailed analysis of this company that will prosper for years to come, check out our special free report: "The Only Energy Stock You'll Ever Need." Don't miss out on this limited-time offer and your opportunity to discover this company before the market does. Click here to access your report -- it's totally free.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2099128, ~/Articles/ArticleHandler.aspx, 10/23/2014 11:32:29 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement