Master Limited Partnerships
Master limited partnership (MLP) investments offer a simple value proposition: tax-advantaged high yields and strong recession-resistant growth potential.
MLPs allow investors to defer much of their personal income tax liability for years into the future or, in many cases, indefinitely. Unlike regular corporations, a master limited partnership doesn’t pay traditional corporate-level tax. Instead, these partnerships pass through the majority of their income to investors in the form of regular quarterly distributions. In other words, 80 to 90 percent of the distribution you receive from the MLP is tax-deferred.
Learn more about how to add master limited partnerships to your portfolio with the latest in-depth analysis in the archive below. For a detailed understanding of the MLPs, including what they do, how they are taxed and the best plays to consider for your portfolio, check out our free guide: MLPs: High Yields and Low Taxes.
Figuring out your K-1 form doesn’t have to be as grueling as climbing K2.
MLPs tend to own physical infrastructure and assets that generate a large slug of depreciation charges each year. In fact, one of the reasons that MLPs are able to pass along distributions to unitholders in a tax-advantaged way is that these firms are simply passing along their depreciation charges. Thus, high depreciation charges are actually good for unitholders.
Partnerships are highly tax-advantaged securities, but these advantages can easily become disadvantages if investors don’t understand the basics of MLP taxation.
The past few months have been painful for most market sectors, including energy. But there’s a silver lining: Income-oriented investors now have a once-in-a-decade opportunity to grab companies with little or no exposure to an economic slowdown or weak energy prices and lock in tax-advantaged yields of 8 to 15 percent.
Judging by the market’s performance this week, investors seem to be adjusting to the fact that we’re probably facing a fairly prolonged recession. The US economy contracted at a 0.3 percent annualized rate in the third quarter as personal consumption nosedived at the fastest rate in 28 years, falling 3.1 percent. But despite what most would take as bad news, the major indexes actually gained more than 2 percent yesterday.
For the past few weeks, I’ve been looking for signs of a broader market low and the potential for energy stocks to see a sharp rally into yearend. Investors have a rare opportunity to buy defensive stocks with conservative management teams to grow their dividends and lock in yields around 10 percent.
Few sectors have been spared the vicious global market selloff and publicly traded partnerships (PTP) aren’t one of the lucky few.
Inside my subscriber-based service, The Energy Strategist, I recommend a handful of companies that are organized as publicly traded partnerships (PTP); the most common forms of PTP are Master Limited Partnerships (MLP) and limited liability companies (LLC). I’m also co-editor of The Partnership, a newsletter dedicated solely to investing in this group. Here's one stock I currently recommend in both publications.
Publicly traded partnerships (PTP) haven’t been immune to the credit crunch and market malaise that began last summer. The industry benchmark Alerian MLP Index declined 23 percent from its July 2007 highs to its March 2008 lows.
Wall Street ended the week lower despite better-than-expected economic data after Microsoft walked away from its heavily hyped attempt to takeover Yahoo and crude prices continued to climb.