Just a few hours after that article was published, Capital Product Partners announced it would maintain its $0.41 distribution ($1.64 annualized) for the fourth quarter, but slashed its full-year 2010 distribution guidance to $0.225 per quarter ($0.90) annualized. That’s almost a 50 percent haircut from its previous payout. The $0.41 payout covering the fourth quarter will be paid in a few weeks and will be the last payout at that rate.

Investors attracted to the Capital Product Partners’ 18 percent-plus yield will now find that the MLP yields around 10 percent, assuming the reduced payout of $0.90 per year. The reason for the cut was exactly as we projected: Capital has a large number of ships coming off-contract in 2010, and current charter rates are depressed. This will make it tough for the company to resign its ships under long-term deals at attractive rates.

It’s unclear whether Capital Product Partners will have to cut it distribution further. However, there are several MLPs in our model Portfolios that offer yields near or above 10 percent that are more likely to raise their payouts this year–not slash them.

This is yet another cautionary tale that illustrates why investors need to be careful about chasing high-yielding MLPs–if the business isn’t sustainable, neither are those sky-high yields. Capital Products Partners continues to rate a “Sell” in our How They Rate Portfolio.