Bill Miller seems befuddled. In his July 2010 commentary, he wonders why investors keep purchasing 10-year treasuries yielding about 3%, when companies like ExxonMobil offer much higher potential returns.

His formula for Exxon is straightforward: "A sum of the dividend yield, growth rate and share shrink could represent an attractive annual return even if the valuation stays the same, and the valuation is among the lowest the company has traded at in years." When you add up the components, Exxon could offer 18% returns per year in a low-return environment.

I'm no less baffled than Miller by investors' preference for bonds, but I do think he's on to something. To see whether more Miller-like opportunities like Exxon were out there, I looked for companies with:

  • A dividend yield greater than the 3% 10-year treasury yield
  • A five-year track record of dividend growth
  • A history of repurchasing shares
  • A P/E less than 25

Here's what I found:



5-Yr Div. Growth

Share Shrink


Alliance Resource Partners LP (Nasdaq: ARLP)





Arch Coal (NYSE: ACI)





Alpha Natural Resources (NYSE: ANR)





From the table above, Alliance Resource Partners fits Miller's criteria perfectly. It pays a 6.3% dividend that has been growing 16.1%, on average, for the past five years. Unlike Alliance, Arch Coal and Alpha Natural Resources are not limited partnerships. So it's not surprising to see their lower yields -- zero, in Alpha's case.

The Foolish bottom line
Would Bill Miller consider investing in Alliance Resource Partners? It meets all the criteria above, and it could offer a 22.4% return over time -- although it will be hard for the company to maintain such a dividend growth rate. In today's low-return environment, that's pretty attractive. I don't know why the market is offering up this opportunity, but as long as it is, Alliance Resource Partners could be worth pursuing further.

Million Dollar Portfolio associate advisor David Meier does not own shares of any of the companies mentioned. Alliance Resource Partners LP is a Motley Fool Income Investor recommendation. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.