Master Limited Partnerships (NYSEARCA:MLPS) provide investors income-generating assets with strong secular industry tailwinds. MLPs combine the tax benefits of a limited partnership with the liquidity of publicly traded securities. The majority of MLPs are pipeline businesses, which earn stable income from the transport of oil, gasoline or natural gas. Energy MLPs are defined as owning energy infrastructure in the U.S., including pipelines, natural gas, gasoline, oil, storage, terminals and processing plants.
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. The stable cash flows from fee-based contracts provide stable and strong dividends for shareholders.
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.
MLP screen criteria:
- Market capitalization greater than $3.5 billion
- Beta is below 1.0
- Dividend yield greater than 4.0%
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Kinder Morgan Energy Partners LP (NYSE:KMP)
- Market Capitalization: $29.9 billion
- Beta: 0.37
- Dividend Yield: 5.6%
- EV / EBITDA: 14.9x
ONEOK Partners, L.P. (NYSE:OKS)
- Market Capitalization: $12.1 billion
- Beta: 0.43
- Dividend Yield: 4.1%
- EV / EBITDA: 14.8x
Magellan Midstream Partners LP (NYSE:MMP)
- Market Capitalization: $8.0 billion
- Beta: 0.32
- Dividend Yield: 4.6%
- EV / EBITDA: 15.5x
El Paso Pipeline Partners, L.P. (NYSE:EPB)
- Market Capitalization: $7.7 billion
- Beta: 0.21
- Dividend Yield: 5.3%
- EV / EBITDA: 9.8x
Regency Energy Partners LP (NYSE:RGP)
- Market Capitalization: $4.2 billion
- Beta: 0.81
- Dividend Yield: 7.1%
- EV / EBITDA: 20.7x
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.