MLPs, often spin-offs from energy companies, operate large parts of the nation's energy infrastructure, such as oil pipelines, natural gas processing facilities and storage depots. Because they pass most of their cash flow through to investors, they're popular with income seekers. But MLP shares plunged in March after a tax ruling by the Federal Energy Regulatory Commission raised fears that some pipeline firms' cash flows could be crimped.
Earnings for All
- 35 Ways to Earn Up to 11% on Your Money
- Short-Term Accounts: 1%-2%
- Muncipal Bonds: 2%-3%
- Investment-Grade Bonds: 3%-4%
- Foreign Bonds: 3%-5%
- High-Yield bonds: 3%-6%
- Dividend-Paying Stocks: 4%-6%
- Real-Estate Investment Trusts: 4%-9%
- Closed-End Funds: 4%-9%
- Master Limited Partnerships: 8%-11%
The risks: Analysts say the FERC ruling will have little or no effect on many MLPs. But the move was another blow to the sector, which suffered with the crash in oil and natural gas prices from mid 2014 to early 2016. JPMorgan Chase analysts say that even though rising U.S. oil and gas production is good news for energy-infrastructure firms, fierce competition and the inability of many MLPs to take on more debt could make growth in cash flow and shareholder payouts more difficult for some players. Higher interest rates are also a headwind. And because of the tax issues with MLPs, it's smart to consult a tax adviser before buying.
How to invest: Despite the risks, with MLP share prices beaten down to their lowest levels in at least two years, investors can find high-yielding bargains now. Goldman Sachs recommends Western Gas Partners (WES, $46, 7.9%), which transports and treats natural gas and oil for Anadarko Petroleum and other energy giants. Western, which operates from the Rocky Mountains to Pennsylvania, is on track to generate payouts of $3.83 per share this year and $4.07 in 2019, Goldman says. JPMorgan likes Andeavor Logistics (ANDX, $48, 8.4%), which operates oil and gas pipelines, processing facilities, and storage centers in the western and mid-continent regions. The MLP is expected to pay out $3.90 per share this year and $4.15 in 2019.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
MLPs on brokerage firm Stifel's buy list include Green Plains Partners (GPP, $18, 11.0%), which owns and operates storage tanks, terminals and other facilities for Green Plains Inc., the world's second-largest owner of ethanol production plants. Green Plains Partners is a play on soaring export demand for grain-based ethanol to blend with gasoline in energy-hungry foreign markets, including China, India and Brazil. Stifel projects Green Plains Partners' annual payout to investors to rise from $1.82 per share in 2017 to $1.98 in 2018 and $2.09 in 2019.
-
Quiz: How Much Do You Know About Taxes on Social Security Benefits?Quiz Social Security benefits often come with confusing IRS tax rules that can trip up financially savvy retirees and near-retirees.
-
Are You Ready for 65? The Medicare Initial Enrollment Period QuizQuiz Turning 65 soon? Test your basic knowledge of Medicare's Initial Enrollment Period (IEP) rules in our quick quiz.
-
3 Ways to Stretch the 2026 Social Security COLA For Your BudgetThree steps retirees can take to stretch the Social Security COLA to fit their budgets.
-
What Made Warren Buffett's Career So RemarkableWhat made the ‘Oracle of Omaha’ great, and who could be next as king or queen of investing?
-
With Buffett Retiring, Should You Invest in a Berkshire Copycat?Warren Buffett will step down at the end of this year. Should you explore one of a handful of Berkshire Hathaway clones or copycat funds?
-
Stocks at New Highs as Shutdown Drags On: Stock Market TodayThe Nasdaq Composite, S&P 500 and Dow Jones Industrial Average all notched new record closes Thursday as tech stocks gained.
-
9 Warren Buffett Quotes for Investors to Live ByWarren Buffett transformed Berkshire Hathaway from a struggling textile firm to a sprawling conglomerate and investment vehicle. Here's how he did it.
-
A Timeline of Warren Buffett's Life and Berkshire HathawayBuffett was the face of Berkshire Hathaway for 60 years. Here's a timeline of how he built the sprawling holding company and its outperforming equity portfolio.
-
Berkshire Buys the Dip on UnitedHealth Group Stock. Should You?Buffett & Co. picked up UnitedHealth stock on the cheap, with the embattled blue chip one of the newest holdings in the Berkshire Hathaway equity portfolio.
-
What Set Warren Buffett ApartAs Warren Buffett prepares for retirement, we reflect on what we've learned from his 60 years of leadership at Berkshire Hathaway.
-
Value vs Growth Investing Isn't So SimpleThe difference between growth and value stocks isn't black and white.
