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Credit Suisse stresses a more defensive posture in MLPs, focusing attention on large, relatively...

Credit Suisse stresses a more defensive posture in MLPs, focusing attention on large, relatively liquid, investment-grade MLPs or affiliates with exposure to the coming crude oil production boom in North America. Its eight favorite MLPs to buy now: WMB, QRE, LNG, TRGP, CQP, XTEX, ACMP, GEL.
Comments (8)
  • I agree that CQP and LNG look best. However, I think I Will just buy the "basket" of MLPs (symbol: AMLP or MLPA). Both are ATFs and report on form 1099 not a K-1.
    22 May 2013, 04:10 PM Reply Like
  • I agree..also look at some refineries...
    22 May 2013, 06:17 PM Reply Like
  • that sounds nice but many of those names are small MLPs not very large
    22 May 2013, 04:25 PM Reply Like
  • Williams is large, and owns a stake in Access. Might be worth looking at. I dont like QRE at all tho, not sure why they recommended it.
    22 May 2013, 06:26 PM Reply Like
  • I do not agree with many of the choices!
    22 May 2013, 05:51 PM Reply Like
  • By buying the etf you lose about a % point on the yield because they pay taxes. I may be wrong, but I think you lose the tax benefit as well (unless you are holding in an IRA). It only costs a couple of bucks for you to duplicate the eft by buying a little of each mlp that's in the eft.
    22 May 2013, 06:03 PM Reply Like
  • I do not understand the worry about K-1s. MLPs rarely if ever report a taxable gain on the K-1s and my accountant throws them away. (My accounting firm is the third largest in the world so I'm sure she knows what she is doing.) I keep track of the distributions to see how much of my original cost has been returned. The share price going up or down is of no interest either unless the distribution falls below the yield on the 10 year treasury note. If you buy an ETF you are paying taxes needlessly. Apple doesn't pay taxes, why should you?
    22 May 2013, 06:19 PM Reply Like
  • If you buy an MLP ETF there are several negative consequences, because all MLP ETFs are taxed as C corporations and pay dividends rather than distributions.

     

    1) Distributions received by the ETF are taxed at the corporate tax rate before the ETF pays dividends, and the ETF charges a management fee, so the dividend is always significantly less than the original distributions. Ron Rowland has written a number of SA articles on this topic.

     

    2) The ETF dividend is taxed to you at the dividend tax rate, thus your net dividend is reduced by two taxes. If you owned the MLPs instead of the ETF, and your basis were greater than 0, then your total tax burden would have been deferred to some time in the future and you would have had the benefit of either a) greater compounding had you reinvested the distributions as opposed to the dividend, or b) more cash in hand.
    23 May 2013, 06:56 PM Reply Like
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