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"The best run company in the industry" whose "run could be far from over," Jim Cramer says...

"The best run company in the industry" whose "run could be far from over," Jim Cramer says of Kinder Morgan Partners (KMP +0.9%). The main reasons he likes the MLP: It has little exposure to fluctuations in the spot price of commodities; it's "a fabulous business to be in" to benefit from newly discovered U.S. oil and gas deposits; and the 5% yield is more than triple the return from 10-year Treasurys.
Comments (25)
  • Kinder Morgan Partners is NOT A STOCK AND DOES NOT PAY DIVIDENDS. It is a Master Limited Partnership and pays distributions, not dividends. Important because MLP distributions are completely different from dividends for tax purposes. The CNBC website's article on Mr. Cramer's tout of KMP did not mention this little detail.
    MLP require their unitholders to deal with a K-1 tax form, which will complicate your tax return and introduce you to IRS forms you've probably never seen before. The trade off is that the MLP distribution is partially sheltered from current income tax liability, but will create future tax issues when the units are sold. Educate yourself about MLPs before investing in one.
    19 Apr 2013, 03:56 PM Reply Like
  • What Uncle Pie says is the truth! I had 11 additional tax forms this past tax season because of MLP's (or what the IRS calls ETP's - Exchange Traded Partnerships).
    It's a big pain in the drain, but worth it for an excellent investment return.
    19 Apr 2013, 04:03 PM Reply Like
  • There are at least three different disciplines that use the same words but assume different meanings.

     

    We have the Accountants who are trained to take funds from investors for the Government.

     

    We have the Wall Street financiers whose pleasure is clearly to take funds from the public and there own clients.

     

    And then we have the Investors who may include the above employees, but also may include Insiders, Chartists, and plain speaking people like those Shakespeare’s spoke of in the Merchant of Venice, who’s only Investment goal is to put away funds now, in the hope of getting more back later.

     

    Interest: http://bit.ly/11U1Wug
    20 Apr 2013, 08:46 PM Reply Like
  • Sell KMP and buy KMI, problem solved.
    20 Apr 2013, 10:31 PM Reply Like
  • How's 5% dividend more than triple 10-year t-note yield of ~1.7%????
    19 Apr 2013, 03:58 PM Reply Like
  • Cramer said 5.77%
    19 Apr 2013, 05:30 PM Reply Like
  • I'll say it again, IT'S NOT A DIVIDEND!!
    19 Apr 2013, 07:15 PM Reply Like
  • Yell it does not change the fact that the propectus for KMI says holders of common stock share equally in any dividend declared by our board of directors,
    20 Apr 2013, 03:53 AM Reply Like
  • KMI and KMR are holding companies for the partnership. KMI is a corporation that you can put in a sheltered retirement account. KMR retains the cash distribution and pays in shares, so there are no K-1s, no 1099s, no UBti and you do not assume a tax liability until you sell.

     

    Only KMP and EPB are pure MLP plays. Sophisticated watchers of Cramer are aware about the various ways to invest in the Kinder family of stocks. He as been promoting them for years.

     

    Pool of capital: http://bit.ly/RIM0UU
    19 Apr 2013, 05:15 PM Reply Like
  • KMI is actually the general partner of the partnership. KMI is a C Corp, which pays dividends, while KMP is an MLP which pays distributions and generates a K-1 form. KMR is a clone of KMP which pays stock dividends instead of cash distributions and thus will have about the same total return as KMP without the K-1 forms. The partnership is in the "high splits" which means that the profits are NOT split evenly between the limited partners (owners of KMP and KMR) and the general partner (KMI)...the general partners get a proportionately larger share. Therefore, as Mr. Kinder points out in the presentation on the company website, KMI dividends will grow faster than KMP distributions.

     

    Long KMI and KMP
    19 Apr 2013, 07:19 PM Reply Like
  • First, KMR is not a holding company for KMP nor would I consider KMI to be a holding company of KMP. My definition of a holding company is one that owns a controlling interest in another company or companies and lets the underlying companies control their own operations subject only to broad requirements and restrictions. By that definition, KMI is the opposite of a holding company since as general partner they make all the decisions and the limited partners have little to say about the operation. KMR owns only a non-controlling portion of KMR and thus is not a holding company.

     

    Second, you can put any or all of the three in a retirement account; the question is what are the pro and cons of doing so with each. Most SA people seem to agree that KMP is the least attractive form to put in a retirement account. While KMI has none of a MLP's disadvantages, it is certainly not the same as KMP. They have the risks of a G.P; they are the G.P. of El Paso, and they share in profits disproportionately. KMR, as a clone or as I like to refer to it, a shadow of KMP, is the best fit for a retirement account of the three.

     

    And last, Uncle Pie, I suggest you stop beating your head against the wall. You will never convince commenters or authors to differentiate between dividends and distributions. They will tell you that THEY don't want to confuse people by using two terms for the SAME thing!!
    20 Apr 2013, 01:17 AM Reply Like
  • Since the 1570s, holding means “property held," especially stock shares.

     

    pop art :> First, KMR is not a holding company for KMP nor would I consider KMI to be a holding company of KMP.

     

    As investors use the term a holding company is a company or firm that owns other companies’ outstanding stock. The term usually refers to a company which does not produce goods or services itself; rather, its purpose is to own shares of other companies. KMI (formerly known as Kinder Morgan Holdco LLC) primaraly owns shares of KMP, KMR and EPB.

     

    Holding: http://bit.ly/13A0cKE

     

    pop art :> My definition of a holding company is one that owns a controlling interest in another company or companies and lets the underlying companies control their own operations subject only to broad requirements and restrictions.

     

    A holding company is a company that, owns shares in other companies. If it only holds cash it is a shell corporation.

     

    What Is a Holding Company? http://bit.ly/ZDE6jw

     

    pop art :> as general partner they make all the decisions and the limited partners have little to say about the operation.

     

    Maybe you can explain to me why the KMr prospects says Kinder Morgan Management, LLC is a limited partner in Kinder Morgan Energy Partners, L.P. and manages and controls its business and affairs.?

     

    pop art :> KMR, as a clone or as I like to refer to it, a shadow of KMP, is the best fit for a retirement account of the three.

     

    You lose the long term capital gain advantages of KMR if you convert it to ordinary income in a sheltered retirement account. What do you lose with KMI?

     

    Uncle Pie :> differentiate between dividends and distributions.

     

    All dividends are distributions, but not all distributions are cash dividends.
    20 Apr 2013, 04:30 AM Reply Like
  • MLP's forms have a lot of work, but that is why I pay an accounted. Only down fall is that your K1's come late most of the time (Late March for many ). You have to wait for the corporations to do their taxes before you get the K1's.
    19 Apr 2013, 05:35 PM Reply Like
  • Uncle Pie is right, it is a distribution. But that gives you tax advantages, and the K-1 is not such a big deal.
    19 Apr 2013, 09:31 PM Reply Like
  • For about 700 years Distribution has meant to deal out in portions. http://bit.ly/Z8g6cC

     

    For almost 400 years Dividend has meant, portion of interest on a loan, stock, etc. http://bit.ly/11q9S5e
    20 Apr 2013, 04:38 AM Reply Like
  • I am just a common ordinary investor. Who gives a crap what you call "free" money. K-1's are no big deal. Years ago I owned KMP and wish I had kept it. I recently bought it again and I doubt if I will ever sell it. The very first K-1 I received I just followed the instructions that came with it. I didn't know what and why I was doing but it was just a matter of following their illustration. The IRS didn't disagree so if you can follow instructions it's no big deal and it didn't take that much time. All the rhetoric above is quite amusing. Something like picky, picky or maybe more like bitch, bitch!
    20 Apr 2013, 09:36 AM Reply Like
  • I'm with you, fcchamb. The original SA blurb didn't mention dividend (or distribution), just yield. I though it was, well, unusual for someone to start yelling that it wasn't a dividend.

     

    I also think that if people can't figure out how to do the taxes on any of their investments, they need to either learn how, hire someone who knows how, or to never invest in that sort of product.

     

    The only thing I don't like about K-1s is that they arrive late.
    20 Apr 2013, 09:50 AM Reply Like
  • fcchamb :> Years ago I owned KMP and wish I had kept it. I recently bought it again and I doubt if I will ever sell it. <

     

    This seems to be a common investment strategy. Buy it back, and hold. It is when you buy and sell MLPs, without selling out completely that k-1s get complicated.

     

    If I was receiving KMP from the Copono merger I would swap them for KMR and gain on the discount and easier filing, as it widens back out.

     

    Richard Kinder on Natgas: http://bit.ly/11vs3ov
    20 Apr 2013, 10:00 AM Reply Like
  • People sure get worked-up over the distinction between 1099 (dividend) and K-1 income. Take a little time to learn the reporting, hire a tax accountant, invest in MLP's through your IRA or SEP, or buy a C-corp GP. Substance of income is much more important than the form in which it is paid.
    21 Apr 2013, 07:41 AM Reply Like
  • Hiring experts leaves us open to unnecessary liability's and costs. Putting MLPs in sheltered retirement accounts means that you must also deal with UBTI.

     

    Much easier to play the game the way Kinder designed it. KMR no hired hand expence, no sheltered retirement accounts, no K-1s, no 1099s, and no UBTI. But still mucho dinero from the giant energy footprint on North America.
    21 Apr 2013, 07:57 AM Reply Like
  • Good points, all. However MLP's are held, one needs a level of tax expertise or access to it. As opposed to KMR, want about KMI?
    28 Apr 2013, 07:44 PM Reply Like
  • KMI is a normal corporation.

     

    A Fool speaks: http://bit.ly/15RcP2s
    28 Apr 2013, 08:46 PM Reply Like
  • Not a problem if you buy within an IRA; nobody seems to mention this.
    21 Apr 2013, 04:09 PM Reply Like
  • If you hold an MLP in an IRA then the administrator will deal with the UBTI and charge you for it out of your principle. When you finally take a withdrawal you might have to pay tax on that same income a second time.

     

    But if you go with a company like KMI or KMR that hold shares in an MLP but they themselves are not an MLP. Then it is not a problem if you buy within an IRA. But you lose the deferred tax advantages of the LLC.

     

    A Fool speaks: http://bit.ly/15RcP2s
    21 Apr 2013, 04:37 PM Reply Like
  • Nobody mentions that you can avoid all these reporting hassles if you invest within an IRA.
    21 Apr 2013, 04:10 PM Reply Like
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