Diary of a Dividend Diva: What About MLPs?
When we are talking yield, the subject of master limited partnerships (MLPs) invariably comes up. These are typically cash flow businesses whose capital structure -- a limited partnership -- results in the firms paying out high yields. As with all partnerships, the tax burden passes through to the partner, with no corporate-level tax burden. MLPs mostly operate in energy distribution such as oil and natural gas pipelines, and many are "household names," at least to us investing types: Kinder Morgan (KMI), Plains All-American (PAA), ONEOK (OKE).
For buy-and-hold yield, the group is usually pretty good -- with one caveat. You are making a bet on energy commodities, and when energy isn't working, the names get smacked. For instance, one popular MLP index ETF, the Alerian MLP Index Trust (AMZX), has lost 4% so far this year, trailing the S&P 500 by more than 1,000 basis points. The Cushing 30 MLP Index is down nearly 10%. Until this year, the AMZX had outperformed the S&P 500 for 12 years in a row. As with any strategy, buy-and-hold works -- until it doesn't....368 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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