I am retired and take educated guesses on all things financial.

February 05, 2008

February 6, 2008: Master Limited Partnerships (MLPs) Poised For Growth

Master Limited Partnerships, or MLPs, provide investors with tax advantaged high yields and, in some instances, very attractive capital gain potential as consolidation brings an economy of scale to this rather fragmented industry. Some analysts believe that parity of MLPs with other high yield investments would imply an approximate 20% upside from their present value. Most analysts have a general rating of "Hold" on MLP securities, which has been the norm in this sector. I believe that MLPs need to be selected on an individual basis and have found several that may perform very well. Some may even qualify as part of the "going green" schemes. Enbridge Energy Partners, for instance, very recently annouced a large carbon capture initiative in Alberta, CA (Alberta Saline Aquifer Project) which has attracted the participation of nineteen energy producers in the region.

The best of the lot appear to be Enbridge Energy Partners, Enterprise Product Partners, NuStar, Boardwalk Pipeline Partners, Kinder Morgan Energy Partners and TEPPCO. Kinder Morgan Energy Partners and Enbridge have outstanding, forward-looking management teams. TEPPCO is in a sweet spot for pipeline expansion/consolidation.

The following list presents Oil and Gas MLPs you may want to research for possible inclusion in your diversified portfolio for tax advantaged income and some growth:

Atlas Pipeline Partners (APL) 8.09% yield
Boardwalk Pipeline Partners (BWP) 5.7%
Crosstex Energy (XTEX) 7.64%
Enbridge Energy Partners (EEP) 7.39%
Energy Transfer Partners (ETP) 6.67%
Enterprise Product Partners (EPD) 6.27%
Holly Energy Partners (HEP) 6.92%
Kinder Morgan Energy Partners (KMP) 6.37%
NuStar (NS) 6.94%
Plains All-America Pipeline (PAA) 6.67%
TEPPCO (TPP) 7.28%
Williams Partners (WPZ) 6.20%

Be prepared for some extra tax forms, relatively easy to complete, if you hold these in your trading account.