MLPs For A Low Interest Rate World

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Includes: EPB, KMP, MMP, OKE, RGP
by: Bear Fight

Master Limited Partnerships (MLPs) provide investors income-generating assets with strong secular industry tailwinds. As the Federal Reserve drives down short-term interest rates, MLPs provide much needed current income. MLPs provide stable yields and are often times higher than those of common stocks. In a highly correlated, "risk-on, risk-off" world, MLPs provide access to asset classes that is less correlated to stocks and bonds. MLPs have only modest direct commodity sensitivity, as the Company's business model is derived from fee-based contracts that are largely insensitive to commodity price fluctuations.

MLPs are a limited partnership that is publicly traded on a securities exchange. MLPs combine the tax benefits of a limited partnership with the liquidity of publicly traded securities. MLPs provide access to a low beta asset class with rich dividend yields.

Outperforming the Broader Market

MLPs have outperformed the broader market as measured by the S&P 500 (NYSEARCA:SPY) over the last three years. In addition to providing strong nominal returns in capital appreciation, these MLPs provide investors with strong dividends.

MLP screen criteria:

  • Market Capitalization greater than $3.5 billion
  • Beta is below 1.0
  • Dividend Yield greater than 4.0%

Kinder Morgan Energy Partners LP (NYSE:KMP)

  • Market Capitalization: $28.5 billion
  • Beta: 0.38
  • Dividend Yield: 5.8%
  • EV / EBITDA: 14.4x

ONEOK Partners, L.P. (OKS)

  • Market Capitalization: $11.5 billion
  • Beta: 0.43
  • Dividend Yield: 4.3%
  • EV / EBITDA: 14.3

Magellan Midstream Partners LP (NYSE:MMP)

  • Market Capitalization: $7.6 billion
  • Beta: 0.34
  • Dividend Yield: 4.8%
  • EV / EBITDA: 15.5x

El Paso Pipeline Partners, L.P. (NYSE:EPB)

  • Market Capitalization: $7.4 billion
  • Beta: 0.21
  • Dividend Yield: 5.6%
  • EV / EBITDA: 9.5x

Regency Energy Partners LP (NYSE:RGP)

  • Market Capitalization: $3.9 billion
  • Beta: 0.81
  • Dividend Yield: 7.2%
  • EV / EBITDA: 18.9x

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Dividend Yields

MLPs provide investors with strong dividend yields in a low interest rate environment.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.