Master Limited Partnerships (MLPs) provide investors income-generating assets with strong secular industry tailwinds. As the Federal Reserve drives down short-term interest rates, MLPs provide much needed current income. MLPs provide stable yields and are often times higher than those of common stocks. In a highly correlated, "risk-on, risk-off" world, MLPs provide access to asset classes that is less correlated to stocks and bonds. MLPs have only modest direct commodity sensitivity, as the Company's business model is derived from fee-based contracts that are largely insensitive to commodity price fluctuations.
MLPs are a limited partnership that is publicly traded on a securities exchange. MLPs combine the tax benefits of a limited partnership with the liquidity of publicly traded securities. MLPs provide access to a low beta asset class with rich dividend yields.
Outperforming the Broader Market
MLPs have outperformed the broader market as measured by the S&P 500 (SPY) over the last three years. In addition to providing strong nominal returns in capital appreciation, these MLPs provide investors with strong dividends.
MLP screen criteria:
- Market Capitalization greater than $3.5 billion
- Beta is below 1.0
- Dividend Yield greater than 4.0%
Kinder Morgan Energy Partners LP (KMP)
- Market Capitalization: $28.5 billion
- Beta: 0.38
- Dividend Yield: 5.8%
- EV / EBITDA: 14.4x
ONEOK Partners, L.P. (OKS)
- Market Capitalization: $11.5 billion
- Beta: 0.43
- Dividend Yield: 4.3%
- EV / EBITDA: 14.3
Magellan Midstream Partners LP (MMP)
- Market Capitalization: $7.6 billion
- Beta: 0.34
- Dividend Yield: 4.8%
- EV / EBITDA: 15.5x
El Paso Pipeline Partners, L.P. (EPB)
- Market Capitalization: $7.4 billion
- Beta: 0.21
- Dividend Yield: 5.6%
- EV / EBITDA: 9.5x
Regency Energy Partners LP (RGP)
- Market Capitalization: $3.9 billion
- Beta: 0.81
- Dividend Yield: 7.2%
- EV / EBITDA: 18.9x
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Dividend Yields
MLPs provide investors with strong dividend yields in a low interest rate environment.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
