October 10, 2007: Master Limited Partnerships are a good thing, now

Pictures: TEPPCO system and,below,Enbridge system

Master Limited Partnerships, or MLPs, are poised to outperform other high yielding investments. In my opinion, several MLPs provide a compelling valuation for investors relative to other yield investments, including high yield debt, utilities and REITs.

Better still, parity of MLPs with other high yield investments would imply an approximately 40% upside from their present value. Plus several brokerage houses insist that MLPs will increase their return to unit holders by an average of 5.1% through at least 2010. In the most conservative report, published recently by Credit Suisse, MLPs have a 17% upside.

Recent weakness provides a good entry point into liquid names with strong growth and high dividend yields. I have looked for several weeks to invest free cash from real estate operations. I have decided to increase my stake in a few of the MLPs today, not finding a whole lot of value elsewhere.

The best of the lot, imo, are EEP, EPD, KMP, MIC (barely),NS, BWP and TPP - all having large capital expenditure programs that should drive distribution growth.

Here is a simple list of MLPs for your review:

Atlas Pipeline Partners (APL) 7.4% yield
Boardwalk Pipeline Partners (BWP) 5.8% yield
Crosstex Energy (XTEX) 6.6% yield
Enbridge Energy Partners (EEP) 7.4% yield -- I bought this security
Energy Transfer Partners (ETP) 5.9% yield
Enterprise Product Partners (EPD) 6.0% yield
Holly Energy Partners (HEP) 6.1% yield
Kinder Morgan Energy Partners (KMP) 6.7% -- perhaps the best managed company
Macquerie Infrastructure (MIC) 5.9% yield -- infrastructure asset play
NuStar (NS) 6.0% yield
Plains All America Pipeline (PAA) 5.9% yield
TEPPCO (TPP) 6.9% yield -- added to my existing position
Williams Partners (WPZ) 4.7% yield

This is a sample of MLPs. There are many more that you may wish to explore for yield and performance, plus the tax advantaged distributions that make these securities even more worthwhile to purchase.