Master Limited Partnerships – By Yield
By: Tim McPartland,
We have what we believe to be a complete list of Master Limited Partnerships (MLPs) below. Master Limited Partnerships are primarily involved with the energy arena–pipelines, crude oil storage, refined product storage, exploration and production of oil or gas, coal production — but may be involved in diverse areas such as Cemeteries, Investment Firms, Amusement Parks and Sand Mining.
Master Limited Partnerships have the same liquid trading characteristics as common stock, yet they are very different from common stocks. The most obvious difference is that MLP’s are ‘pass through’ investment vehicles–they pass through the income to you the investor. The Partnership pays no taxes at the company level–instead passing the income to you (and of course you likely pay taxes on the income). Thus one level of taxation is removed allowing the investor to receive a larger distribution.
It is a popular misconception that Master Limited Partnerships (MLPs) must pay out a certain level (percentage) of net income in distributions. This is not true – they do not have a set level of distributions that they must make. The contract between the general partners and limited partners spells out distributions.
MLP’s must derive 90% of their revenues from natural resources activities (this includes real estate related activities). Of course the definition of natural resources seems to always move around.
It should be recognized that most MLP’s pay out most of their cash as distributions and this means they will likely be in the mode of issuing more units (shares) or debt most of the time. If they are to grow they have no choice.
Be aware that MLPs are typically more difficult to deal with at tax time than regular income issues. At tax time you will receive a K-1 which deals with your portion of income, losses and deductions–unlike just plain old interest or dividends this can get more complex. If you use a CPA for your taxes this will be no big deal, but if you do your own taxes expect to spend some extra time dealing with K-1’s.
It should be noted that if you hold MLPs it is generally best to hold them in a taxable account if you have a large number of shares as it is possible that if you have over $1000 annually in distributions you could well owe taxes (even if earned in a tax sheltered account)
During 2013 there have been many IPOs of MLPs. In general we believe that buying new MLPs has more risk then sifting through the more ‘seasoned’ issues with proven track records.
NOTE THAT MOST MLP’S ARE ENERGY RELATED AND WHEN ENERGY PRICES MOVES IN BIG UP AND DOWN MOVES THESE ISSUES WILL MOVE WITH ENERGY PRICES
FOR A QUICK SCAN ON ISSUES FALLING MORE THAN 3% JUST LOOK FOR RED IN THE ‘% CHANGE’ COLUMN
FOR A QUICK SCAN ON ISSUES RISING MORE THAN 3% JUST LOOK FOR GREEN IN THE ‘% CHANGE’ COLUMN
Clicking on the ticker symbol below will take you to the company website where further due diligence.
Distributions Updated 10/31/2017