Akaralph's  Instablog

Just my opinion, but is anyone else concerned about where the markets are headed when investors realize that we are being fed "manipulated" statistics to elevate us into a false sense of security about the economy and our futures.

With the era of "buy and hold" now history, how can we protect our invested resources. I personally no longer trust mutual funds, and while I retain faith in some closed-end funds, I was burned somewhat by those choosing to severely reduce, or completely eliminate dividends.

A few years back I became exposed to master limited partnerships (MLP's), their tax advantages, large distributions and high yields. After several weeks of research I decided to focus on midstream energy mlp's, since their share prices are somewhat immune to movements of the underlying oil and natural gas commodities. Further, I noticed that the majority of these had histories of continuous increases to their quarterly distributions - some since their inception.

Earnings are not the driving factors with the mlp's - distributable cash flow (DCF) and the coverage ratio for the distribution are what really count here. Look for increasing DCF (year over year and quarter vs. prior quarter) and coverage rations in excess of 100%.

The midstream mlp's consist primarily of pipeline and transportation operations, as opposed to upstream (exploration/production) or downstream (terminaling, storage and distribution) operations. Midstream mlp's including Teppco (TPP), Targa Resources (NGLS), Magellan Midstream Partners (MMP), and Copano (CPNO) all fit the criteria at the present time. Use the Alerian MLP index as a means to further identify portfolio candidates. Many of the mlp's trade options so the opportunity to increase income by writing covered calls only makes them look better.

Disclosure: I am long TPP, NGLS and CPNO at present.