Master limited partnerships

Article Index

What Is a YieldCo?

By , Associate Editor, Money Morning • @DavidGZeiler -

If you follow alternative energy stocks, the question of "What is a YieldCo?" has probably come up at some point over the past couple of years.

That's because YieldCos have become popular in the green energy industry as a way to raise relatively cheap capital to finance new projects while setting up a revenue stream from finished projects.

For investors, YieldCos offer several advantages. This is particularly true for income investors...

Two Stocks to Buy to Play America's Energy Boom

By , Chief Investment Strategist, Money Map Report -

stocks to buy

It's officially silly season in U.S. politics leading up to midterm elections, with both parties stooping to distraction and hyperbole.

As usual, some of the most misguided utterances so far have come from the White House and, specifically, from our own Commander-in-Chief.

Read more here...

Investing in MLPs After Kinder Morgan: What You Need to Know

By , Global Energy Strategist, Oil & Energy Investor • @KentMoors_OEI -

investing in MLPs

Important Update on Investing in MLPs: Last week, I discussed Kinder Morgan Inc.'s (NYSE: KMI) bombshell announcement that it was effectively abandoning the master limited partnership (MLP) structure it had helped to pioneer.

Since MLPs have long been the go-to for yield-hungry investors, the piece attracted a lot of attention - along with quite a few comments.

Here are some reader questions we received - and answers...

What the Kinder Morgan (NYSE: KMI) Deal Means for Master Limited Partnerships

By , Global Energy Strategist, Oil & Energy Investor • @KentMoors_OEI -

With its bombshell consolidation announcement, Kinder Morgan Inc. (NYSE: KMI) has suddenly become the third-largest energy company in America.

In a $71 billion deal, Kinder Morgan is bringing all of its publicly traded companies under one roof as a single C-corporation.

Does this massive consolidation mark the end of master limited partnerships (MLPs) as a main driver in the energy sector?

MLPs: An Enticing Alternative to Conventional Dividend Investing

By , Money Morning -

dividend investing

With U.S. stocks at all-time highs, many analysts warn that asset valuations are out of touch with reality and a correction is headed our way.

In the event of a market correction, investors will be limited to settling for returns lower than the historical average or seeking out obscure investments that add an extra percentage or two in dividends.

Alternatives to conventional dividend investing strategies, such as master limited partnerships (MLPs), are worth a look. MLPs are limited partnerships that are publicly traded on securities exchanges. Here’s how they work…

Marketology: An Easy Way to Start Making 20% More Money (Immediately)

By , Chief Investment Strategist, Money Map Report -

Thanks to hopelessly convoluted tax laws and patchwork regulation - red tape that shows no sign of being simplified - most of us are forced to house our wealth in a variety of accounts. They can run the gamut, from fully taxable to fully tax-advantaged.
Choosing the right ones for your investments is critical.
In fact, I'd even go so far as to say that making sure your money is in the right type of account is nearly as important as the specific investments you pick.
That's because, when you get this right, you can enjoy an additional 10% to 20% advantage over those who don't.
The downside of ignoring this fact, of course, is twofold: diminished returns, and penalties from the government - sometimes both!
Naturally, Wall Street likes it this way, because it helps them "help" you by coming up with a never-ending litany of new products, new regulations, and, of course, new fees.
But don't worry.
Today I'm going to show you how to ensure that your investments are in the right accounts, so that can maximize your returns immediately... and for years to come.
It's easy, too.

Take a look at this "efficiency" chart I made for you...

The Benefits of Investing in Master Limited Partnerships

By , Contributing Writer, Money Morning -

Income-oriented investors looking for an alternative to dividend stocks and bonds have a great solution: investing in master limited partnerships. You see, MLPs combine the tax benefits of a traditional limited partnership with the liquidity of a publicly traded company. MLPs have a partnership structure, but they issue units that trade on an exchange like […]

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Investing in MLPs: Three Set to Soar on Shale Expansion

By , Contributing Writer, Money Morning -

If you're one of the millions of investors trying to find decent yielding income investments, there's one place you should be looking -- Master Limited Partnerships (MLPs).

That's because if you play your cards right you can pocket a cool 6% to 10% or more from investing in MLPs - while the yield on the broad market barely cracks 2%.

As an added bonus, 80% to 90% of distributions from MLPs are tax-free until you sell.

As America's newfound shale formations spew forth million of barrels of oil and gas an infrastructure boom will be needed to store and ship it.

And a few select MLPs will be primed to cash in.

To continue reading, please click here...

Investing in Master Limited Partnerships: Earn Higher Returns and Beat the IRS

By , Contributing Writer, Money Morning -

Contrary to popular belief, you can earn higher returns and pay lower taxes.

All you need to do is make one simple move. It's achieved by investing in master limited partnerships, or MLPs for short.

Due to an obscure law passed during the Reagan era, companies that service the oil and energy sector are allowed to funnel profits directly to their investors.

And because of a unique tax loophole, investors who hold MLPs for the long term can completely avoid paying taxes on 80%-90% of all of their earnings.

For MLP investors, those returns can be substantial.

First, there are the hefty "distributions" MLPs pay out year after year. In fact, several of the 50 companies in the benchmark Alerian MLP Index offer yields of 7.5% or higher.

Second, there is price appreciation which accounted for about 32% of the gain the index has generated since the end of 2007, according to Investing Daily.

Altogether, that gave the Alerian MLP Index a total return of 66.6%. Meanwhile, the S&P 500 Index lost 1.55% over the same period.

What is a Master Limited Partnership?

Most MLPs are involved in the business of connecting energy producing fields with refineries, distribution, and retail sales centers.

But, despite popular belief, most have limited exposure to commodity prices.

That's because most MLPs own midstream energy assets such as feeder pipelines and storage and transport facilities.

It's a great business model because MLPs don't actually take ownership of the commodities. They transport, store and process them.

Doing so, they simply act as gate-keepers, extracting a heavy toll every time a transaction takes place. So when oil or gas is moved from Point A to Point B, MLP pipeline owners get paid.

Or when oil moves through the system and has to be stored, MLPs get paid. In fact, almost anytime anything happens in the energy sector, MLPs get paid.

It all adds up to healthy profits that, by law, are passed on to investors.

To continue reading, please click here...

Master Limited Partnerships: A Simple Way to Put More Cash in Your Pocket

By , Money Morning -

These days, high-yielding investments are a must-have for investors.

It's nonnegotiable. This market is simply too volatile to be taking long shots. You have to be prepared for the next potential market dip, and that means having a steady stream of "bonus" cash coming in on a regular basis.

Unfortunately, interest rates right now are absurdly low, junk bonds are too risky, and high-yielding stocks are few and far in between.

That leaves just one place to look for serious income: Master Limited Partnerships (MLPs).

MLPs, for those not familiar, are tax-advantaged limited partnerships whose units are traded on exchanges just like common shares of stock.

However, a key difference between MLPs and stocks is that MLPs pay very high yields - typically 5% to 12%. This is because U.S. law mandates that they pass most of their income on to unit holders.

Still, being limited partnerships, their ordinary shareholders do not suffer unlimited liability (as they would in a regular partnership) and so can treat their investment as if it was in an ordinary company.

However, because their income is not taxed at the partnership level, the government limits the kinds of businesses that can use the MLP structure. It's restricted primarily to operations engaged in the extraction, storage, and transportation of energy commodities, which are deemed essential to the U.S. economy and national security.

As a result, MLPs derive 90% of their income from natural resources - primarily oil, natural gas, and coal production and transportation.

Two especially attractive businesses for the MLP structure are pipelines and ownership of existing oil resources. Pipelines generally charge a fixed fee per unit of product carried, so they earn a steady return that can safely be paid out to investors. Existing oil and gas fields incur no exploration costs and only limited production costs. Meanwhile, their exposure to oil and gas prices can be hedged in the futures market, so they, too, can safely pay a fixed dividend to investors.

MLPs economically bear more resemblance to fixed income investments than to regular shares. However, the drawback is generally very little upside potential, except through variation in oil and gas prices.

Additionally, if the MLP is invested in a finite pool of oil or gas, there is a finite lifetime to it, and the income to investors may be accompanied by a gradual loss of principal. Fortunately, MLP tax treatment accounts for this, and so a large portion of each year's dividends is considered a return of principal. That may have advantages to some investors holding MLPs in taxable accounts.

MLPs are generally not very risky, and bear a strong resemblance to each other, so even though there are two exchange-traded funds (ETFs) that invest in MLPs - the Alerian MLP ETF (NYAE: AMLP) and JP Morgan Alerian MLP Index ETN (NYSE: AMJ) - there does not seem to be much advantage.

Instead, you're better off investing in one of the following three high-yielding MLPs:

To continue reading, please click here...