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MLP = Many Lofty Payouts

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January 02, 2013 – Comments (7)

A search for yield turned up several 5-star rated master limited partnerships.

I've been dragging my feet on finishing this article since MLPs were the most common finds in a yield search back in Nov.  The five MLPs profiled all have excellent distribution payout records, over the past five years (4.5 for El Paso since it hasn't been around for five years yet) none of them have recorded a payout drop.  And two, Enterprise Products (EPD) and El Paso Pipeline (EPB) have raised the distribution every single quarter over that stretch.

Of the 45 partnerships listed in TMFs MLP tag; only 7 carry less than a four star CAPS rating.

It looks like the cliff deal opened the valves on MLP unit prices today.  Of the five I profiled, the worst performance for the day was Williams (WPZ) up only 2.06%.  The winner of the group was Kinder Morgan Partners (KMP), up a whopping 4.75% today.

It can take some searching to find investments with good yields and the world of MLPs is a good place to search.

Disclosure:  No position in any partnership mentioned.  I do have an MLP postion in Magellan Midstream, but it carries a 4-star rating so didn't make the cut for the article.

However, Magellan did make the cut for fellow Foolish writer Aimee Duffy's 5 Best Midstream Stocks of 2012.  

As always, comments or questions welcome here or at the article

Happy New Year!

Russ

 

7 Comments – Post Your Own

#1) On January 02, 2013 at 8:11 PM, outoffocus (23.06) wrote:

I actually sat in on a investment presentation/continuing ed presentation on an ATLS MLP that was opening soon I believe.  Now this presentation was in September of last year, long after I green-thumbed ATLS which is currently my 2nd best performing CAPS pick (only by a few points.  After listening to the presentation I was even more convinced about the future of natural gas in the US.  I also got to exchange a few words with the Director of Investor Relations with ATLS.  So I definitely agree with the sentiment that MLPs are great for high net worth clients looking to park their money for a while and earn some above average yields.  Yea they may make tax return prep a little more expensive, but giving the potential writeoffs it could be worth it.

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#2) On January 02, 2013 at 8:16 PM, TMFDeej (99.32) wrote:

Hi Russ.  My personal favorite MLP is UAN.  Though it was up huge today like many of the others that you mentioned.  I also own a little BWK.

If you're looking for yield, check out  SCPZF, it has a new double digit divvy, paid monthly.

Those are the three that I would buy right now if I was looking for yield.

Deej 

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#3) On January 02, 2013 at 8:24 PM, rd80 (98.29) wrote:

I'm curious, why wouldn't MLPs be good for other than high net worth clients?

My limited experience is the tax prep complications with MLPs are over-hyped.  Tax software handles the K-1 info with no trouble.  The biggest complication is the K-1 doesn't come out until well after W-2s, so you can't file early in tax season.

Thanks for the comment.  Hope you had a great Christmas.

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#4) On January 02, 2013 at 8:47 PM, outoffocus (23.06) wrote:

Well I guess my definition of HNW is lower than most. I guess I mean higher net worth people.  People with over 1million in net worth. I'm also speaking from an advisor's perspective.  ATLS, while publicly traded, some of their offerings are subject to suitability standards (a result of Dodd-Frank I believe) so I couldn't really offer them to small investors.  

And yes, tax software can handle K1s fine, and I'm sure a good portion of the Fool audience may be able to handle doing their own K1s and schedule Es.  However, many of the clients I come in contact with, regardless of net worth and income, can barely handle a schedule A, let alone have any clue how to handle a K1.  That's where people like me come along. And yes if I have to do someones tax return with K1s, it does get a bit more expensive.   

 

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#5) On January 02, 2013 at 9:36 PM, rd80 (98.29) wrote:

Deej - thanks for the additional tickers.  Thinking about it after the fact, I should have looked for a mix of MLPs to profile - include a UAN or TNH, exploration/production, etc.

outoffocus - thanks for the reply.  I could definitely see where a K-1 would take more time, and add cost, for a professional tax preparer.  I wasn't aware of a suitability standard.  Interesting that there's nothing stopping one of your clients from heading to Vegas and betting big, but the gov't says MLP units in their accounts is a no-no.

 

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#6) On January 02, 2013 at 10:27 PM, outoffocus (23.06) wrote:

rd80

Dont get me started on the financial services industry regs... 

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#7) On January 07, 2013 at 3:32 PM, CMA630 (< 20) wrote:

We are financial planners in the chicago area and utilize MLP's quite often in our financial plans.. We even have an All MLP portfolio for our clients. The K-1 issue has come up quite often with our clients, thus we have offered to do their tax returns free of charge for folks with accounts of $500k or more. This is a great investing tool since the payments are tax-free from these issuers.. As long as you hold onto them for the long-haul!

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