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I trust everyone is having a good day as Americans settle in to celebrate the Thanksgiving holiday with friends and family.
Over several months, I've been writing about how to invest in a high-inflation environment. I've covered everything from floating-rate investments, high yield debt, real estate investment trusts (REITs), business development corporations (BDCs), closed-end funds, commodities, and commodity stocks.
Today, I want to draw your attention to Master Limited Partnerships (MLPs), a type of business venture required to distribute a set amount of cash to investors, making them a great vehicle to produce the kind of income needed to offset inflation. They trade on exchanges just like stocks and typically have business models that experience stable cash flow.
You don't often see these companies in the headlines because... well, they're pretty "boring." But that's perfect for us, because "boring" often means "reliable," and that's exactly what we need.
The pick I have for you today boasts over a 7% annual yield and gets you exposure to the petroleum and natural gas infrastructure sector - a great position to be in as energy demand rises across the globe. And it's trading around just $40 a share.
I'm talking about the Alerian MLP ETF (AMLP), which seeks investment results that correspond to the price and yield performance of its underlying index, the Alerian MLP Infrastructure Index.
AMLP holds a portfolio of 15 of the best midstream MLPs. Its top five holdings include Energy Transfer LP (ET), Plains All American Pipeline LP (PAA), Magellan Midstream Partners LP (MMP), MPLX LP (MPLX), and Western Midstream Partners LP (WES) which account for 10.74%, 10.62,10.52%, 10.35%, and 9.85% respectively.
Regarding sectors, 39.53%, 33.64% and 20.07% of the holdings are exposed to petroleum pipeline transportation, gathering and processing, natural gas pipeline transportation, respectively.
At the current price and based on the current distribution, AMLP is delivering a juicy 7.25% annual yield.
That's far better than most stocks and it's relatively inline with current inflation expectations. That means the yield offsets the impact of inflation while you hold the units for price appreciation.
That's a double win in my book!
So, if you're looking for a way to generate stable cash flow in an inflationary period, consider adding AMLP to your portfolio.
I hope you enjoy the Thanksgiving holiday! As always, keep an eye on your inbox for more inflation-beating investment ideas.
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About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.