thinking ahead

Capturing Higher Distribution Growth in MLPs

Some of the stuff in this article looks familiar:

On Apr 07 03:28 PM thinking ahead wrote:

> A tip for fellow MLP holders: once cashflows reach certain thresholds,
> amounts diverted to the GP increase. These are called incentive distribution
> rights (IRD's), and they usually top out at tier 3 - 50%, after 15%
> and 25% steps. Most of the more established MLP's have already reached
> the top 50% IDR level (e.g. KMP, ETP, OKS). EPD is an example of
> a MLP that has a lower IDR threshold - 25% maximum.
>
> Once MLP's reach tier 3, the distribution growth typically slows
> - not stops, just slows - because more of the growth is being sent
> to the GP. It's all a way to incentivize the GP to do a good job
> for the MLP unit holders.
>
> One way to take advantage of this is to buy the GP's. But there are
> far fewer available, because these are the most profitable parts
> of the partnership structure and the smart guys like Kinder and Dan
> Duncan and Lowes like to keep the GP slot for themselves. But there
> are some available. One that has reached the 50% IDR limelight is
> ETE. ETE is the GP for well known ETP. If ETE follows the past pattern
> it should start to boost dividends significantly, while ETP grows
> somewhat slower that in the past. I've left some detail out to keep
> this post short, so do your reading. Disclosure: I own both ETP and
> ETE, along with KMP,BWP and EPD.