Riga

Why Buy MLPs?

I fully agree that, as of this writing, it is a great time to purchase these energy MLPs. They are broadly cheap as a group. They are under-owned by institutional investors and their need to regularly access the capital markets to fund expansion, somewhat like business development companies (e.g. ACAS, ALD, GLAD) is depressing their share prices to the extent that their cost of capital has risen. The Sem Group bankruptcy in Oklahoma has also hurt perceptions. These issues will, however, dissipate over time as the reliable "toll-taker" nature of the business shines through.

The author also usefully mentions KMR as a nice alternative to dealing with the K-1s and as an option for those investors who would like energy infrastructure MLPs in their IRA accounts. In that regard, I would also like to highlight a second option, corporations, acting somewhat akin to closed-end mutual funds, that specialize in holding pipeline MLPs. These include symbols TYG and KYN. They both have good yields, are diversified among MLPs moving crude, refined products, and natural gas. Above all, they are themselves structured as corporations, not limited partnerships, so you get a normal 1099-DIV, not a K-1. That means less complicated tax filing AND qualified dividends. Yet, it gets better. Because of the underlying tax deferral qualities of the MLP structure, and since these two corporations own exclusively MLPs, your 1099-DIV will still characterize a substantial amount of your quarterly dividends as return of capital, which lowers your tax obligation. Of TYG and KYN, my personal favorite is the former. The URL is www.tortoiseadvisors.c.... Thanks for the MLP write-up.