In a saucepan with a tightly fitting lid, bring water to a boil. Add rice, reduce heat to low. Cover and simmer 10 minutes.
After 10 minutes of simmering, stir, then add raisins. Cover and simmer 8 more minutes.
Stir in peanuts, then cover and simmer 2 more minutes, until liquid is absorbed.
Remove from heat and turn into serving dish. Season with pepper to taste and toss with toasted coconut.
Adapted from Penzeys Spices