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. [View news story]
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.
For the last 12 months you are correct. Over the longer term, PM has beat the pants off the S&P for as long as it has existed, meaning since it was spun off from PM USA.
3 year total return: PM 32.41%, S&P 17.41% 5 year total return: PM 15.42%, S&P 5.8%
My gut feeling is that all of the marijuana grow operations in your neighborhood would come out into the open, their customers would come out into the open as they already have in Washington state, and at first there would be little business for MO because those customers are already accustomed to rolling their own joints. I have a hard time imagining how MO would break into that market.
"so you want PM at a 5% yield basically? Righttttt the only way you get that is something catastrophic ala 2009"
Actually, the last time PM was at 5% yield was in early October 2011. I know because I bought some at exactly that yield.
August - Sept 2011 was the Euro panic. The market tanked pretty drastically, but not nearly as much as 2008-2009.
Short of something like the Euro panic, I agree that PM will not be selling at a 5% yield. If you want an idea of when to buy and you are not willing to wait for something similar, Bill Maurer has written a number of excellent articles on how and when to buy into PM. Here is his latest: http://bit.ly/11dhhbT
The Worst 'Big 4' Tobacco Company Right Now [View article]
Tim,
Great minds think alike! (just kidding)
I sold half my RAI position yesterday and put all of it to work in LO. That dividend payout ratio was the deciding fundamental factor, and the new 52 week high was the deciding technical factor.
Energy infrastructure largely escapes damage from yesterday's tornado that ripped through Oklahoma, though a Southern Star natural gas pipeline reports some damage. Valero (VLO) and Phillips 66 (PSX) say their refineries escaped damage, Enterprise Products Partners (EPD) reports no damage to its Seaway pipeline, and operations at the Cushing crude hub are unaffected. [View news story]
Imagine the damage if a freight train carrying crude oil had been hit.
Looking At Fundamental Questions In MLP Investment [View article]
Packers1,
In my example above for EPD, if I assume that I bought the additional units at the start of last year, then the combined current year decrease amount plus distribution amount was 13.8% of the beginning capital account. I think it could become difficult if not impossible to use distribution reinvestment alone to keep your capital account above zero.
Looking At Fundamental Questions In MLP Investment [View article]
rlp,
My explanation did not call out the distribution, it simply looked at the beginning and ending capital account. The difference is: +new units, +-current account increase(decrease), -distributions. My K-1 for EPD shows +new units (I bought more during the year), - current account decrease, - distribution. If I had not bought more units during the year, the net change in my capital account would have been negative by the amounts of the current year decrease and the distribution.
I also do not understand what the 'current year increase (decrease)' represents. According to the naptp, the distribution is ROC (until basis hits zero). http://bit.ly/yb1qPX
Looking At Fundamental Questions In MLP Investment [View article]
areoguy48,
There is a way you can estimate when your basis hits zero. Look at your latest K-1, section L, your capital account analysis. The Ending capital account amount is a good approximation of your basis at year end. If you did not buy additional units during the year, the difference between the Beginning capital account and Ending capital account is the annual decrease in your capital account. Project that annual decrease into the future and you will have an idea of when your capital account, and therefore your basis, will hit zero. This will also tell you the amount by which you will need to increase your capital account, and therefore your basis, in that future year if you want to keep your basis above zero.
If we keep moving up like this, stocks could go "parabolic," says Art Cashin. The stocks that have the heaviest short positions have already raced ahead of the indices, and they are going to crumble if we keep going. (Video). [View news story]
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. [View news story]
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.
Are We In A REIT Bubble? [View article]
http://seekingalpha.co...
http://seekingalpha.co...
I have been buying into the decline. The lower the price, the higher the yield. Bring on the short sellers!
Are We In A REIT Bubble? [View article]
The standard valuation metric for MLPs is distributable cash flow (DCF).
Are We In A REIT Bubble? [View article]
If You Must Invest In Tobacco [View article]
For the last 12 months you are correct. Over the longer term, PM has beat the pants off the S&P for as long as it has existed, meaning since it was spun off from PM USA.
3 year total return: PM 32.41%, S&P 17.41%
5 year total return: PM 15.42%, S&P 5.8%
If You Must Invest In Tobacco [View article]
If You Must Invest In Tobacco [View article]
Actually, the last time PM was at 5% yield was in early October 2011. I know because I bought some at exactly that yield.
August - Sept 2011 was the Euro panic. The market tanked pretty drastically, but not nearly as much as 2008-2009.
Short of something like the Euro panic, I agree that PM will not be selling at a 5% yield. If you want an idea of when to buy and you are not willing to wait for something similar, Bill Maurer has written a number of excellent articles on how and when to buy into PM. Here is his latest: http://bit.ly/11dhhbT
The Worst 'Big 4' Tobacco Company Right Now [View article]
Great minds think alike! (just kidding)
I sold half my RAI position yesterday and put all of it to work in LO. That dividend payout ratio was the deciding fundamental factor, and the new 52 week high was the deciding technical factor.
Energy infrastructure largely escapes damage from yesterday's tornado that ripped through Oklahoma, though a Southern Star natural gas pipeline reports some damage. Valero (VLO) and Phillips 66 (PSX) say their refineries escaped damage, Enterprise Products Partners (EPD) reports no damage to its Seaway pipeline, and operations at the Cushing crude hub are unaffected. [View news story]
Looking At Fundamental Questions In MLP Investment [View article]
Looking At Fundamental Questions In MLP Investment [View article]
In my example above for EPD, if I assume that I bought the additional units at the start of last year, then the combined current year decrease amount plus distribution amount was 13.8% of the beginning capital account. I think it could become difficult if not impossible to use distribution reinvestment alone to keep your capital account above zero.
Looking At Fundamental Questions In MLP Investment [View article]
Looking At Fundamental Questions In MLP Investment [View article]
My explanation did not call out the distribution, it simply looked at the beginning and ending capital account. The difference is: +new units, +-current account increase(decrease), -distributions. My K-1 for EPD shows +new units (I bought more during the year), - current account decrease, - distribution. If I had not bought more units during the year, the net change in my capital account would have been negative by the amounts of the current year decrease and the distribution.
I also do not understand what the 'current year increase (decrease)' represents. According to the naptp, the distribution is ROC (until basis hits zero). http://bit.ly/yb1qPX
Looking At Fundamental Questions In MLP Investment [View article]
There is a way you can estimate when your basis hits zero. Look at your latest K-1, section L, your capital account analysis. The Ending capital account amount is a good approximation of your basis at year end. If you did not buy additional units during the year, the difference between the Beginning capital account and Ending capital account is the annual decrease in your capital account. Project that annual decrease into the future and you will have an idea of when your capital account, and therefore your basis, will hit zero. This will also tell you the amount by which you will need to increase your capital account, and therefore your basis, in that future year if you want to keep your basis above zero.
If we keep moving up like this, stocks could go "parabolic," says Art Cashin. The stocks that have the heaviest short positions have already raced ahead of the indices, and they are going to crumble if we keep going. (Video). [View news story]
http://bit.ly/10MHc5h