Yield Search Unearths Growing Coal-Mining Stock

The stockpiles have since been worked down, and prices, both for coal and Joy Global shares, are closing in on their summer 2006 highs. The stock's quarterly dividend, last raised a year ago to 15 cents from 11.3 cents, is starting to look skimpy, making for a yield of just 1% at today's price. Shareholders can hardly complain that they're not being lavished with enough cash. Management took advantage of the stock selloff to retire shares on the cheap. This year it'll spend eight times as much on repurchases as on dividends. (Share repurchases make remaining shares more valuable.)

Joy's growth prospects seem impressive. Demand for steel and electricity is still soaring in emerging markets, particularly China, where coal is used to make both. In markets where local currencies have gained against the dollar, Joy's machines now seem cheap. In the U.S., where coal produces half of electricity, a crop of new plants are scheduled to come online through the end of the decade.

The combination of adequate dividends and plenty of growth potential is precisely what our Not Just Income screen looks for. Joy Global recently made the cut along with seven other companies. Use SmartMoney's stock screener and the full list of screen demands to run the search for yourself anytime.

You won't see much growth out of Joy Global this year. Sales are seen rising just 5% to $2.53 billion, while earnings are forecast to increase three cents a share to $2.58. Expect plenty of confusion surrounding that last number, or at least the fiscal fourth quarter's contribution to it, when the company reports earnings on Dec. 19. Analysts are looking for 71 cents a share, but the company has previously said that it'll take tax charges during the quarter that together should total about 16 cents a share. It's likely that Wall Street's consensus estimate is made up of some individual forecasts that include the tax charge and some that don't. When the company reports its numbers, it'll be difficult to judge whether they beat estimates or not.

More important for long-term investors, next year Joy should resume a pace of growth befitting a company whose shares are up eightfold since 2001. Sales are seen growing by 13% and earnings, by twice as much. And while a big digging machine can last decades, it'll need new gears, motors, buckets and treads along the way. Joy is the biggest aftermarket supplier in the business. More than half its income comes from selling parts and repairs, which are more lucrative than new equipment.

The stock goes for 18 times forecast earnings for fiscal 2008. That seems a good deal, considering the near-term growth opportunities and the world's long-term dependence on mining. As Joy Global is fond of saying in its investor publications, "Everything is grown or mined."