I’m going to move to reduce the exposure of my Dividend Income Portfolio (http://jubakpicks.com/jubak-dividend-income-portfolio/ ) to the natural resources sector by selling coal-mining master limited partnership Natural Resource Partners (NRP) out of the portfolio. My choice was between selling this master limited partnership or Penn Virginia Resources (PVR) and I decided to stick with Penn Virginia because the company’s gas distribution, coal-bed methane, and timber assets give it a more diversified blend of natural resources businesses than Natural Resource Partners.
So why sell Natural Resource Partners?
Part of this sell decision is a timing call: It looks like the natural resource sector of the stock market could be due to rotate out of favor. (For more on that se my post http://jubakpicks.com/2009/12/04/good-news-on-jobs-hurts-treasuries-oil-stocks-crushes-gold/ ) Part of the decision is company specific, though. The company has seen debt rise in the third quarter. That, plus coal volumes that, in the third quarter were down 28% from the third quarter of 2008, will make it hard for the company to increase distributions by more than a few cents a unit in 2010. I’m selling these units out of my Dividend Income Portfolio with a 60% drop in price since I purchased them on September 6, 2005 but with a total loss, including $1,553 in dividends, of 44%. The company paid its third quarter dividend on November 13. (Full disclosure: I will sell my units of Natural Resource Partners three days after this column is posted.)