Many previous articles on this site have detailed the appeal of Big Oil stocks such as ExxonMobil (NYSE: XOM) and Chevron (NYSE: CVX). The same is true for Big Coal stocks such as Peabody Energy (NYSE: BTU), but for different reasons. For growth, value, and income investors, Peabody Energy, like Chevron and ExxonMobil, is very appealing.
That cannot be stated for how the stock market is treating the coal sector as its exchange traded fund, Market Vectors Coal (NYSE: KOL), is down by nearly 6 percent for 2014 (chart below).
When a sector is off like that, investors should always look at the blue chips like Peabody Energy. It is pretty much considered to be the ExxonMobil of the coal group. As the biggest company in the sector, like Market Vectors Coal is a good play on the sector.
Peabody Energy is now trading around $16 a share. The mean analyst target price over the next year of market action is $21.82. That makes it alluring for value investors. The price-to-sales ratio of 0.64 makes it appealing to value investors, too. That means that each dollar of sales is going at about a one-third discount in the stock price.
Growth investors should like how earnings-per-share are soaring this year. Wall Street expects that to continue into the future. The trends for growth are very bullish.
The dividend yield is also attractive for Peabody Energy.
At present, the average dividend yield is under 2 percent for a member of the Standard & Poor’s 500 Index (NYSE: SPY). For Peabody Energy, the dividend yield is 2.11 percent. As conditions improve in the sector, so should the dividend.
Peabody Energy and Market Vectors Coal are for long term investors. Conditions are not favorable now for coal stocks. But there is growth ahead. The dividend of Peabody Energy pays for its shareholders to wait.