Jim Cramer's Favorite Master-Limited Partnerships And REITs

 |  Includes: ENB, EPB, EPD, EQR, FRT, HCN, KMI, KMP, MWE, NLY
by: Insider Monkey

Jim Cramer is the host of CNBC's "Mad Money" and the chairman of TheStreet.com. In 1987, Cramer started his own hedge fund and returned an average of 24% per year between 1987 and 2001. Cramer also authored six money management books.

Cramer has been recommending master-limited partnerships and REITs because of their high dividend yields, which are made possible due to their organizational structure. In order to avoid corporate taxes, these companies have to return the majority of profits back to shareholders. Here are some of Cramer’s favorite MLPs and REITs:

Kinder Morgan (NYSE:KMI):This is Cramer’s favorite master limited partnership and currently yields 4.5%. Kinder Morgan has a $20 billion market cap and yields 4.8%. The stock trades at 85.7 times earnings.

Kinder Morgan Energy Partners (NYSE:KMP): Cramer loves these master-limited partnerships because of their strong dividend and low exposure to swings in the price of oil. Kinder Morgan Energy Partners has a $16 billion market cap and yields 6.5%. Ken Fisher of Fisher Asset Management has a small position in KMP (more of Fisher’s picks can be seen here).

Enterprise Product Partners (NYSE:EPD): Cramer said companies like Enterprise Product Partners act as toll-road operators and can offer consistent high dividends because they place the majority of profits back into the hands of shareholders, thus avoiding corporate taxes. EPD has a market cap of $35.85 billion and yields 5.7%. The company announced plans to extract more natural gas and transport it to the south.

El Paso Pipeline Partners (NYSE:EPB): Cramer recommends owning this “terrific stock” that yields over 5%. The pipeline company has a $7.5 billion market cap and trades at 18 times earnings. Cramer said he likes these pipeline companies because of their reduced exposure to oil prices.

Annaly Capital Management (NYSE:NLY): This high yielding REIT is one of Cramer’s favorites. The stock currently yields 14.5% and trades at 6 times earnings. Annaly Capital Management has a $17 billion market cap. Bill Miller of Legg Mason Capital Management owns over 3.5 million shares (see more of Miller’s holdings).

Enbridge Inc. (NYSE:ENB): Cramer likes Enbridge and thinks it is a great stock, but it has gotten too high compared to the others. Cramer said he would rather own the other pipeline operators like Kinder Morgan, Energy Products Partners (EPD) or MarkWest Energy. Enbridge has a $24.78 billion market cap and yields 3%. The stock trades at 20.5 times earnings.

Mark West Energy Partners (NYSE:MWE): Yielding 6.4%, Cramer said the time is right to own this limited partnership pipeline company. Mark West Energy Partners gathers, processes and transports natural gas. The company has a $3.75 billion market cap.

Equity Residential (NYSE:EQR): Cramer expressed that he likes these REITS, but he prefers buying the ones with bigger yields. Since EQR only yields 2.5%, Cramer is willing to buy Health Care REIT, which yields 6.25%. Equity Residential has a $17.73 billion market cap.

Health Care REIT (NYSE:HCN): Although it has been hammered, Cramer calls this REIT a buy. They know there is going to be some retrenchment from Washington, but they have some cushion to withstand it. Health Care REIT has a $8.7 billion market cap and trades at 61.5 times earnings.

Federal Realty Investment Trust (NYSE:FRT): Cramer claims this is the best shopping center REIT in America. It raised its dividend for the 44th consecutive year to 3.4%. Federal Realty boasts a diversified tenant base where no one tenant represents more than 2.6% of portfolio and 93.4% of their portfolio was leased as of June 30th.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.