The effectiveness of fine particle iron catalysts for first-stage coal liquefaction is influenced by the dispersion of the catalyst. Dispersion can be characterized by catalyst surface area, particle size, and crystallite size. Increasing catalyst dispersion by increasing catalyst surface area, and decreasing catalyst particle size and/or decreasing catalyst crystallite size, results in higher levels of coal conversion to soluble products. For iron systems, a distinction must be made between the catalyst precursor and the active catalyst. Coal impregnation with iron catalyst precursors results in higher coal conversion than simple mixing of powdered catalyst precursors with coal. Impregnation of iron precursors onto coal affects catalyst dispersion by maintaining the fine particle size of the precursor during the transformation to the active catalyst phase. Agglomeration to larger particle size catalysts can occur if the iron catalyst precursors are physically mixed with the coal.