Cover Gasoline Costs With An 8% Yielding MLP Investment

Oct.25.12 | About: VanEck Vectors (YMLP)

Filling up your gas tank can be as scary as some of the Halloween costumes currently on the market. With the average U.S. gasoline price remaining stubbornly high at $3.69 per gallon, investors can implement a strategy to cover the cost of filling up.

As an example, we'll take a person who spends $50 per week on gasoline. This amounts to a significant $2600 per year. To cover these costs, an investor could consider a high-yielding Master Limited Partnership (MLP). MLPs are primarily involved in the energy sector. I have discovered an attractive MLP ETF with a distribution yield of 8.41%. This ETF is known as the Yorkville High Income MLP ETF (NYSEARCA:YMLP).

To cover the annual cost of $2600 for gasoline, an investment of $37,000 will be used to start a position in YMLP. With the 8.41% yield, the $37,000 investment will net $3112 in distribution payments for the year. After subtracting the current capital gains tax rate of 15%, the investor is left with $2645, more than enough to cover the annual gasoline costs.

One attractive feature of the YMLP ETF is that it is comprised of 25 individual MLPs. Therefore, investors have their money spread out among a basket of entities with less risk than individual ownership. The fund owns MLPs from the following sectors: energy exploration and production (oil and natural gas), distribution and marketing of propane and natural gas liquids, marine transportation of various commodities, agriculture (fertilizer), and other natural resources (coal, timber, minerals, etc.). The fund does have an expense ratio of 0.82% for the convenience of owning this large basket of MLPs under one ticker.

Another attractive feature of YMLP is that its distributions generate a 1099 tax form rather than the more complicated K-1 tax form, which investors in individual MLPs have to deal with. Some MLP investors don't consider the K-1 form a burden, while others wish to avoid it. YMLP is treated as a regular corporation for federal income tax purposes.

Let's take a look at the top five holdings of the Yorkville MLP fund:



Net Asset Value

per Unit


Cash Flow



Inergy, L.P. (NRGY)



$237 million


Linn Energy, LLC (LINE)



$92.51 million


Vanguard Natural

Resources, LLC (NYSE:VNR)



$189 million


Ferrellgas Partners LP




$124.4 million


Breitburn Energy Partners L.P. (BBEP)



$141.58 million


Click to enlarge

Inergy is involved in the storage and transportation of natural gas and natural gas liquids in the United States and Canada. It's also involved in the production and sale of salt products.

Linn Energy is involved in the acquisition and development of oil and natural gas properties. Its properties are located in the Mid-Continent, the Permian Basin, Michigan, California, and the Williston Basin.

Vanguard Natural Resources is involved in the acquisition and development of oil and natural gas properties in the Permian Basin, the Big Horn Basin, South Texas, the Williston Basin, and the Arkoma Basin.

Ferrellgas Partners is involved in the distribution and sale of propane and related products. It operates its propane tank exchange program under the familiar Blue Rhino brand name.

Breitburn Energy Partners operates in the acquisition and development of oil and gas properties in the Antrim Shale, the New Albany Shale, the Evanston and Green River basins, the Wind River and Big Horn basins, the Powder River basin, the Los Angeles basin, and in Florida's Sunniland Trend.

Overall, the Yorkville MLP ETF is a nice way to cover the cost of filling up the gas tank or to produce income. With its high yield and diversity among different sectors, YMLP looks like a solid investment for the growing sectors that its MLPs operate in.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.