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In recent months, many investors have been drawn towards dividend paying stocks. One type of stock that dividend hunting investors should consider are Master Limited Partnerships, or MLPs. MLP businesses do not pay taxes, which allows the business to pass profits directly through to its shareholders (Unitholders) without the burden of “double taxation.” Since the corporation does not pay taxes, there are more earnings available for dividends. MLPs pass the majority of their earnings (up to 90%) directly through to unitholders who are taxed on their portion of the company’s earnings after deductions have been made for depreciation and other non-cash expenses. This method of distributing earnings allows investors to receive earnings in the form of dividends and pay a reduced rate of taxes.

Kinder Morgan Energy Partners LP (KMP) KMP has a market cap of $26.35 billion with a price to earnings ratio of 565.36. The stock has been trading in a 52 week range between $63.42 and $79.34. The stock is currently trading near the top of its 52 week range at around $79. The company reported third quarter revenues of $2.2 billion compared to revenues of 2 billion in the third quarter of 2010. Third quarter net income was $214 million compared to net income of $320 million in the third quarter of 2010.

One of KMP’s competitors is Enterprise Products Partnership LP (EPD). EPD is currently trading around $46 with a market cap of $39.6 billion and a price to earnings ratio of 23.37. EPD pays a dividend which yields 5.3% versus KMP whose dividend yields 5.9%.

KMP is an energy transportation business that primarily operates as an oil and gas pipeline company. KMP is considered to be a best of breed MLP. In 2010, the company had over $8 billion in revenues and $1.3 billion in net income. The company’s stock has performed very well for an MLP, and is up by 12.1% over the last 52 weeks and 98% over the last three years. Despite the company’s rapid stock growth, it has been able to maintain a high dividend yield. KMP's current dividend is $4.64, and it has announced that it expects to increase the dividend to $4.98 in 2012. The company regularly increases its dividend and has increased its dividend 15 times by 43% since 2006. In additional good news, the company’s recent purchase of the El Paso Corporation (EP) could add to the bottom line and help push the dividend even higher. I think that KMP is an excellent income and growth stock, and I rate it as a buy.

Plains All American Pipeline LP (PAA) PAA has a market cap of $10.17 billion with a price to earnings ratio of 16.19. The stock has traded in a 52 week range between $54.90 and $68.28. The stock is currently trading near the top of its 52 week range at around $68. The company reported third quarter revenues of $8.8 billion compared to revenues of $6.4 billion in the third quarter of 2010. Third quarter net income was $280 million compared to net income of $81 million in the third quarter of 2010.

One of PAA’s competitors is Sunoco Logistics Partners LP (SXL). SXL is currently trading around $35 with a market cap of $3.61 billion and a price to earnings ratio of 14.46. SXL pays a dividend which yields 4.4% versus PAA whose dividend yields 5.9%.

PAA is a pipeline company that engages in the storage and transportation of crude oil and liquid natural gas. In the third quarter, the company increased its revenues by 37.5% and its net income by 245%. The company’s stock price has also prospered and is up by 9.1% over the last 52 weeks and 151% over the last three years. The company has paid quarterly dividends since 1999 and has increased its dividend by 40.5% since 2006. PAA beat third quarter estimates by $0.29 per unit and increased its fourth quarter earnings estimates. PAA has provided investors with excellent stock growth and a growing dividend income. I think the company will continue to outperform, and I rate the stock as a buy.

NuStar GP Holdings LLC (NSH) NSH has a market cap of $1.28 billion with a price to earnings ratio of 19.51. The stock has traded in a 52 week range between $27.94 and $39.98. The stock is currently trading around $30. The company reported third quarter revenues of $19 million compared to revenues of $18.3 million in the third quarter of 2010. Third quarter net income was $18.3 million compared to net income of $17.7 million in the third quarter of 2010.

One of NSH’s competitors is Linn Energy LLC (LINE). LINE is currently trading around $37 with a market cap of $6.62 billion and a price to earnings ratio of 16.35. LINE pays a dividend which yields 7.3% versus NSH whose dividend yields 6.7%.

NSH is a holding company for NuStar Energy LLP which is a pipeline company that stores and transports petroleum products. Over the last three years, the company has had relatively flat earnings. In the third quarter, the company increased year-over-year revenues 3.8% and net income by 3.3%. The company has three units:

1. Storage

2. Fuel and Asphalt refining

3. Transportation

The storage segment is the only sector that will show earnings growth in 2011. As a result of the company’s weak earnings, the stock price is down by 20.4% over the last 52 weeks. The company began paying quarterly dividends in November of 2006 and since that time it has increased dividends nine times by 92.6%. The current dividend is $1.98 per unit. NSH has no catalyst to help increase cash flow and the stock price will probably continue to drop. At some point NSH investors capital losses, will exceed their dividend income. I rate NSH as a sell.

Penn Virginia Resource Partners (PVR) PVR has a market cap of $1.78 billion with a price to earnings ratio of 16.18. The stock has traded in a 52 week range between $20.85 and $29.10. The stock is currently trading around $25. The company reported third quarter revenues of $308 million compared to revenues of $222 million in the third quarter of 2010. Third quarter net income was $36 million compared to net income of $7.3 million in the third quarter of 2010.

One of PVR’S competitors is the Holly Energy Partners LP (HEP). HEP is currently trading around $53 with a market cap of $1.18 billion and a price to earnings ratio of 21.58. HEP pays a dividend which yields 6.5% versus PVR whose dividend yields 8%.

PVR manages coal and natural gas properties. The company has been profitable in each of the last ten years, and in 2010, it increased its year-over-year revenues by 56% and its net income by 136%. The company’s stock price is down by 12.3% over the last 52 weeks, but is up by 198% over the last three years. The company has paid a quarterly dividend since 2002 and has increased its dividend by 40% over the last five years. The current dividend is $2.00. On November 3rd, CNBC stock analyst Jim Cramer endorsed the stock. I like the company’s earnings growth, and believe that the dividend is safe. I rate PVR as a buy.

Energy Transfer Partners LP (ETP) ETP has a market cap of $9.3 billion with a price to earnings ratio of 33.84. The stock has traded in a 52 week range between $33.08 and $55.50. The stock is currently trading around $44. The company reported third quarter revenues of $1.7 billion compared to revenues of $1.3 billion in the third quarter of 2010. Third quarter net income was $67 million compared to net income of $107 million in the third quarter of 2010.

One of ETP’s competitors is the AmeriGas Partners LP (APU). APU is currently trading around $44 with a market cap of $2.5 billion and a price to earnings ratio of 19.12. APU pays a dividend which yields 6.7% versus ETP whose dividend yields 8%.

ETP is a holding company whose affiliates are in the natural gas business. In the third quarter, the company increased its year-over-year revenues 30%, but saw its net income go down by 59%. The company has paid quarterly dividends since 1997, and since 2006, it has increased its dividend by 52% to $3.58. The stock price is down by 13% over the last 52 weeks, but is up by 59.5% over the last three years. On November 7th, Jim Cramer advised investors to stick with ETP. The company has been paying dividends since 1997, and it has a high enough free cash flow to ensure that the dividend is safe. ETP is a strong company, and I believe that with investors turning towards dividend stocks, that ETP’s stock price will improve. I rate ETP as a buy.

Energy Transfer Equity LP (ETE) ETE has a market cap of $8.6 billion with a price to earnings ratio of 28.97. The stock has traded in a 52 week range between $30.78 and $47.34. The stock is currently trading around $39. The company reported third quarter revenues of $2.1 billion compared to revenues of $1.6 billion in the third quarter of 2010. Third quarter net income was $69 million compared to net income of $76 million in the third quarter of 2010.

One of ETE’s competitors is DCP Midstream Partners LP (DPM). DPM is currently trading around $45 with a market cap of $1.99 billion and a price to earnings ratio of 23.97. DPM pays a dividend which yields 5.8% versus ETE whose dividend yields 6.6%.

ETE is a holding company whose subsidiaries collect, store and transport natural gas. In the third quarter, the company increased its year-over-year revenues by 40% but saw its net income decrease by 10%. Long term investors in ETE have benefitted greatly because since 2006 the dividend has increased by 977% from $0.23 to $2.50. The stock price has also performed well and is down by 1.93% over the last 52 weeks but up by 176% over the last three years. The company expects to increase future earnings as natural gas margins move higher and it increases the volume of natural gas that it collects. ETE has provided its investors with strong capital appreciation and a rapidly growing dividend. I think the company will continue to move forward, and I rate ETE as a buy.

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

Source: A Look At 6 High Yield MLPs