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Low interest rates have helped MLPs raise capital at a reasonable cost, enabling returns well...

Low interest rates have helped MLPs raise capital at a reasonable cost, enabling returns well above their cost of capital and supporting cash distribution growth, but Simmons analysts say investor interest should remain strong even as rates rise - though due diligence will be more important than ever. Darren Schuringa says it's crucial to measure an MLP’s coverage ratio rather than the actual money it pays out.
Comments (10)
  • zero interest rates have goosed asset valuations into bubbly territory. Including "junk" bonds (which are no longer 'high yield'), equities, MLPs, and the lot. Be cautious!
    29 May 2013, 06:23 PM Reply Like
  • Agree
    29 May 2013, 07:08 PM Reply Like
  • x2


    Today is a good example of what happens when you chase yield on things that have popped too much
    29 May 2013, 09:27 PM Reply Like
  • Coverage ratio has always been an important metric, when looking at dividend/distribution securities.
    29 May 2013, 09:35 PM Reply Like
  • I've been saying that for years.
    29 May 2013, 10:07 PM Reply Like
  • Thanks for the link interesting stuff.
    29 May 2013, 10:13 PM Reply Like
  • I fail to see the logic in most comments. From my standpoint, you buy as much as you can when interest rates are low and reap the profits from that purchase forever. The best part of MLP's is that the market does a knee jerk reaction and allows you to buy at those lows. I own a lot of over 25 MLPs, and very few are less than I paid, but the distributions are high and keep increasing each year. The coverage ratio can be decieving if you look at a single quater , as the acqusition cost may hit before the revenue from it.. I own many pipelines, a few upstream, and a few downstream. We are currently shipping oil by rail and flaring gas because we now have more production than capacity to move it at the best economical rate. It will only get worse as more wells come on line. I can't think of a better time to borrow at low interst to build more pipelines, and storage. I have been disappointed in none of them and see nothing but upside with well activity and future LNG exports. In many ways, the new remote wells and low interest rates are the perfect conditions for MLPs. The US cannot exist without them. The majority of MLPs will still be paying well when I am long gone. Maybe you would be happier buying gold at 1900 and looking at it at 1300 with zero distribution? There are far more dangerous stocks out there that pay far less.
    29 May 2013, 10:48 PM Reply Like
  • The risks to rising interest rates are if a) the MLP has floating rate debt, and b) MLPs historically trade at a premium to the 10 year. Rising rates on the 10 year should lead to rising rates on MLPs meaning lower prices.


    I agree with you that if you've been in MLPs for years, as I have been, its not as big of a concern, since I'm more worried about distribution growth. But for someone looking to start a new position in MLPs, this may not be the best time, given how low the yields on some of them are.
    30 May 2013, 08:23 AM Reply Like
  • @Mike, completely agree.


    The time to load up was last fall and winter during the fiscal cliff selloff. Picked up EPD in the 40s and APU in the 30s.
    30 May 2013, 08:28 AM Reply Like
  • ED your right on!!! I agree completely with you!! I own 6 MLP's as CORE holdings and their dividends keep growing. I also own some Reits as core holding too .. for the same reasons


    30 May 2013, 07:44 AM Reply Like
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