Market Overview

3 Reasons To Invest In MLPs

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Of the many methods that resulted in Warren Buffett becoming, well, Warren Buffett, was his willingness to invest in unusual opportunities. Shareholders of Berkshire Hathaway (NYSE: BRK-A) are surely happy with his strategies.

Master Limited Partnerships (MLPs) may be just such a profitable, unusual opportunity. An MLP is a publicly traded partnership.

Lots of Choices

The bulk of MLPs in the market today are for oil and natural gas pipelines, and more of those are coming. Royal Dutch Shell (NYSE: RDS-A) recently announced plans spin off its mid-stream pipeline into an MLP through an initial public offering. BP (NYSE: BP) and Occidental Petroleum (NYSE: OXY) are considering doing the same.

With lots of MLPs in the market and more to come, they can be bought in a diversified way, balancing out location, fuel, and more.

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High Yield

Known for their high yields, MLPs are one of the best income classes on the market. As but one example, Kinder Morgan Energy Partners (NYSE: KMP) has a dividend yield of almost 7 percent. The dividend yield for El Paso Pipeline Partners (NYSE: EPB) is more than 7.7 percent. That easily tops the yield of Big Oil stocks such as Occidental Petroleum and Royal Dutch Shell.

Tax Advantages

MLPs have a pass-through tax structure. Owners do not suffer the double taxation of other investments. There is tax when the MLP is sold, as the income is treated as return of capital at that time.

For the right investor, MLPs are a very attractive income vehicle with tax preferences in a booming sector!

Posted-In: master limited partnerships MLP Warren BuffettLong Ideas Dividends Trading Ideas Best of Benzinga

 

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