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The coal industry continues to be one of the largest energy providers in the world. In the United States alone, approximately half a billion short tons of coal are converted into energy each year. After natural gas, coal operations continue to be profitable for investors while supplying the country.
Thinking of investing in the coal industry? Our coal stockpile guide will help you learn more about how coal burning works and what to look for in a coal stockpile. We’ll also introduce you to some of our favorite brokers for investing in stocks under $5, as well as long-term holdings and a few coal stocks that investors have been eyeing this year.
Overview: Coal Stocks
Coal is a fossil fuel formed by layers of sediment. Millions of years ago, thick layers of plants were covered with soil and water, as the early Earth was mostly made up of swamps. Plants and animals would die and settle at the bottom of this swamp. After layers and layers of biological material piled on top of each other, immense pressure turned the carbon from plant and animal matter into hard lumps of coal.
Coal is used as an energy source because the compressed carbon in the pressurized material burns much longer than other materials like wood.
In the 1800s, people started using coal to heat their homes and power the first locomotives and ships. Today, coal is primarily burned to generate electricity. When coal is burned in a kiln, the heat from the coal turns water in a kiln into steam. This steam is then used to spin a turbine and generate electricity, which is then distributed to homes through a transformer.
The United States has more coal than any other country – about 25% of the world’s total coal. Coal must be dug out of the ground and pulverized before it can be used to generate electricity. Currently, 25 states have coal mining operations in place.
The term “coal stockpile” refers to any company involved in the mining, processing or combustion of coal. A company with a stockpile of coal may be responsible for extracting coal from the earth, preparing coal for combustion, burning coal, distributing energy, or all 4 processes.
Although coal is plentiful, it contains trace impurities like nitrogen and sulfur. When a coal-fired power plant or mining operation burns coal, the coal releases these substances into the air. From there, the impurities combine with water vapor from the atmosphere and fall to the ground as acid rain.
Burning coal also releases carbon dioxide, an odorless, colorless gas that traps Earth’s heat as it builds up in the atmosphere. The burning of fossil fuels like coal is thought to contribute to global warming, the gradual increase in global temperatures. “Clean coal” operations that remove certain impurities from coal can help reduce the environmental impact of burning coal for energy.
Best Online Coal Stock Brokers
It doesn’t matter if you’re interested in adding a few coal stocks to your portfolio or want to locate stocks under $10 overnight, you need to open a brokerage account before you can place a buy or sell order. sale. If you don’t have a brokerage account yet, consider a few of our favorites below.
Features To Look For In Coal Stock
A few characteristics can help you identify a profitable coal stock. Some features you might want to look for include:
- Positive earnings per share: The earnings per share (EPS) value of a company indicates the profit that a company produces per issued share. A positive EPS value indicates that a company is profitable, while a negative EPS shows that the company is losing more money than it is making. According to research by Fidelity, average EPS in the energy sector is generally strong, outpacing other industries.
- A low price/earnings ratio: A company’s price-to-earnings (P/E) ratio is equal to the company’s current stock price divided by the company’s EPS. The lower the P/E ratio, the better the value of a stock considered by investors.
- A reasonable dividend yield: Many investors are drawn to the energy sector because these stocks often pay above-average dividends. A dividend is a portion of a company’s profits that is paid out to shareholders.
While it can be tempting to research the companies with the highest dividend per dollar amount, you should be aware of each stock’s dividend yield. Dividend yield is calculated by dividing the company’s annual dividend payout by its current stock price.
As a general rule, avoid investing in stocks with a dividend yield of more than 10% – these are generally considered very risky investments as a high yield indicates that a dividend cut may be coming soon.
Add energy to your wallet with coal
With above-average dividends and lower P/E values, coal – and the energy sector as a whole – can be an excellent level of income-generating diversification for any portfolio. However, it is important to remember that you should never put all of your financial resources into one area. If you decide to buy coal stocks, use them to complement a broader portfolio of total market index funds and S&P 500 funds.
You do not know where to start ? Benzinga’s list of the best socially responsible mutual funds is a great crash course in mindful investing. Additionally, you can check out Benzinga’s guides to the best energy stocks, the best energy ETFs, and the best renewable energy ETFs.