Recent Performance Review Of 6 Small-Cap Oil And Gas MLPs Yielding Over 8%

 |  Includes: BBEPQ, CLMT, ENP, FGP, MMLP, MVO
by: Zvi Bar

A Master Limited Partnership (MLP) is a type of partnership that is publicly traded on a securities exchange. MLPs combine the tax structure of limited partnerships with the liquidity of publicly traded securities. Usually, private partnerships are relatively illiquid compared to public equities.

Most MLPs are publicly traded oil and gas pipeline businesses that earn stable income from the transport of oil, gasoline and/or natural gas. Many derive their revenue based on the amount of product transported and are not sensitive to price fluctuations except where they affect demand. Some MLPs involve other natural resources, and certain other industries, but oil and gas are the most common.

MLPs usually provide their investors, the limited partners, with distributions which are similar to dividends, but taxed differently. It is expected that the distribution growth of MLPs can grow at a rate at or ahead of inflation, based upon energy demand and price growth.

In this now highly volatile environment, many may consider these MLPs a sensible long-term investment. Below are six small-cap MLPs that currently yield over 8 percent, as well as their 1-month and 2011-to date performance rates. One of these listed equities (NYSE:MVO) is actually an oil trust, but the trust owns interests in oil and gas properties of a partnership.

  1. Breitburn Energy Partners L.P. (BBEP)
    • Yield: 9.5%
    • 1-month: 1.44%
    • 2011-to-date: -9.73%
  1. Calumet Specialty Products Partners LP (NASDAQ:CLMT)
    • Yield: 11.6%
    • 1-month: -12.60%
    • 2011-to-date: -18.64%
  1. Encore Energy Partners LP (NYSE:ENP)
    • Yield: 9.8%
    • 1-month: -6.58%
    • 2011-to-date: -14.10%
  1. Ferrellgas Partners LP (NYSE:FGP)
    • Yield: 9.6%
    • 1-month: 7.01%
    • 2011-to-date: -14.83%
  1. Martin Midstream Partners LP (NASDAQ:MMLP)
    • Yield: 8.8%
    • 1-month: 0.38%
    • 2011-to-date: -11.71%
  1. MV Oil Trust (MVO)
    • Yield: 10.4%
    • 1-month: -2.81%
    • 2011-to-date: -0.25%

The last month has been volatile for these oil and gas companies, much like the broader market. Half of these six shares have appreciated and half have depreciated over the term, with performance variations between over a 12 percent loss and a seven percent gain. These variations can be seen in the 1-month chart, below.

Click to enlarge
(Click to enlarge)

MLPs are partnerships, so they do not pay corporate income taxes. The tax liability of the MLP is passed on to its holders. Each investor receives a K-1 statement that details their share of the partnership's net income. That income is then taxed at the investor's individual tax rate. MLPs may also make cash distributions that are not taxed received, but reduce the cost of partnership shares/units and create a tax liability that is deferred until the MLP is sold.

Disclaimer: This article is intended to be informative and should not be construed as personalized advice as it does not take into account your specific situation or objectives.

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