Ned Davis suggests six MLPs to own as interest rates rise

MLPs face dangerous headwinds despite the U.S. energy production boom as borrowing coasts rise, Ned Davis Research says, so the firm unveils an MLP Bond Bear Survival Portfolio containing six recommended names with the ability to produce aggressive growth in distributions.

MLPs with strong distribution growth in the next 12 months should outperform other MLPs by 15% per year, the report concludes.

Magellan Midstream (MMP), Plains All American Pipeline (PAA) and Sunoco Logistics (SXL) boast the best overall traits, the report says, but Access Midstream (ACMP), Enterprise Products (EPD) and Williams Partners (WPZ) also make the grade.

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Comments (9)
  • TGC004
    , contributor
    Comments (457) | Send Message
    I have been very wary of MLP with rising borrowing coasts.
    31 Oct 2013, 06:11 PM Reply Like
  • Brucejfern
    , contributor
    Comments (1736) | Send Message
    I own 4 of the six and own WMB (WPZ's GP) as a levered way into WPZ and even more ACMP which I own individually too. Good to see Ned Davis confirming what I hoped I already knew which is a central thesis I function under..... that rising interest rates will not impact these MLPs as much as many other because of their structure, strong balance sheet, and in the case of the above excellent DCF coverage except for WPZ but hopefully that is a temporary phenomenon relating to an aggressive organic capex program the GP (WMB) is providing significant concessions for.
    31 Oct 2013, 07:14 PM Reply Like
  • Energysystems
    , contributor
    Comments (2113) | Send Message
    I completely agree on WMB. I've been watching it for quite a while. Really like the move towards more fee based revenues. A long time(relatively) shareholder of ACMP, and I really liked that deal for both companies moving forward.


    I'd like to start a position in WMB around 30. Hopefully I'll get another crack at it.
    31 Oct 2013, 07:52 PM Reply Like
  • jklk0429
    , contributor
    Comments (216) | Send Message
    If "any" MLPs have not locked in low, long-term interest rates by this time, I would be really surprised.
    31 Oct 2013, 07:16 PM Reply Like
  • fredj
    , contributor
    Comments (155) | Send Message
    I've got WES, KMR and EPD. I'm not worried.
    31 Oct 2013, 07:45 PM Reply Like
  • jcadams3561A
    , contributor
    Comments (27) | Send Message
    Surprised GEL, SEP and KMI not mentioned. Especially GEL and KMI, since both are showing 10% +++ distribution growth per annum.
    Full disclosure: I own them all, but am considering picking up SXL, EPD and MMP (IMHO these are the best of the 6 mentioned.)
    31 Oct 2013, 09:33 PM Reply Like
  • jcadams3561A
    , contributor
    Comments (27) | Send Message
    Independent conservative investor. Intense scrutiny of qualitative and quantitative aspects of "high yield" (3% plus) securities.
    31 Oct 2013, 09:35 PM Reply Like
  • jakeob
    , contributor
    Comments (3) | Send Message
    I have a large position in KMR and feel real good about it. It is one of the largest pipelines in the US and I believe Richard Kinder is the top energy executive collecting 1 dollar per year in salary.
    31 Oct 2013, 09:35 PM Reply Like
  • glf4mny
    , contributor
    Comments (464) | Send Message
    some good ones there but got to watch those that have payout ratios exceeding 100% as their distributions are not sustainable
    1 Nov 2013, 12:20 AM Reply Like
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