With domestic oil production rising to about 9 million barrels per day—up from 8.4 million in mid 2016—MLPs are thriving once again. The firms operate pipelines, storage terminals and other types of infrastructure for the oil-and-gas industry. MLPs distribute most of their cash flow, after expenses, and as they build more pipes to meet demand, they should be able to increase distributions. “We’re back in an environment in which the industry will grow,” says Chris Eades, who manages funds that buy MLPs for ClearBridge Investments.
Earnings for All
- Municipal Bonds: 1%-5%
- Investment-Grade Bonds: 2%-4%
- Real-Estate Investment Trusts: 4%-6%
- High-Yield Bonds and Bank Loans: 3%-5%
- Foreign Bonds: 3%-6%
- Closed-End Funds: 7%-9%
- Mortgage REITs: 8%-11%
Risks to your money. The stocks could slide if oil prices tumble and producers scale back on drilling (reducing demand for pipes, storage and processing plants). Steeper financing costs for new projects could hurt the business. If you buy individual MLPs, you’ll have to deal with complex K-1 tax forms.
How to invest. Among individual stocks, Eades recommends three firms: Nustar Energy (NS, $52, 8.4%), Enable Midstream Partners (ENBL, $17, 7.6%) and Enterprise Products Partners (EPD, $28, 6.0%). The first two MLPs should benefit from rising oil production in the shale regions of Texas and Oklahoma, Eades says. Enterprise is one of the largest and most diversified MLPs, with a solid balance sheet and projects in the works that should lead to steadily higher distributions. “If you want to own one MLP stock, this is it,” says Eades. If you’d rather not pick your own securities, take a look at Alerian MLP ETF (AMLP, $13, 6.3%). It recently held 25 stocks, emphasizing the biggest MLPs. Investors in the ETF receive standard 1099 tax forms rather than K-1s. One drawback, however: The ETF doesn’t yield as much as many individual MLPs, in part because of relatively high annual fees of 0.85%.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
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.
-
Rally Fades on Mixed AI Revolution News: Stock Market TodayAll three main U.S. equity indexes opened higher but closed lower as a seven-session winning streak for the S&P 500 came to an end.
-
Stretch Your Holiday Shopping Budget Further with These Under-$50 Gifts That Don't Feel CheapAmazon October Prime Day is the perfect chance to nab some under-$50 gifts that feel more expensive than they are (because normally they would be).
-
The Most Tax-Friendly States for Investing in 2025 (Hint: There Are Two)State Taxes Living in one of these places could lower your 2025 investment taxes — especially if you invest in real estate.
-
The Final Countdown for Retirees with Investment IncomeRetirement Tax Don’t assume Social Security withholding is enough. Some retirement income may require a quarterly estimated tax payment by the September 15 deadline.
-
Dividends Are in a RutDividends may be going through a rough patch, but income investors should exercise patience.
-
Municipal Bonds Stand FirmIf you have the cash to invest, municipal bonds are a worthy alternative to CDs or Treasuries – even as they stare down credit-market Armageddon.
-
Best Banks for High-Net-Worth Clientswealth management These banks welcome customers who keep high balances in deposit and investment accounts, showering them with fee breaks and access to financial-planning services.
-
High Yields From High-Rate LendersInvestors seeking out high yields can find them in high-rate lenders, non-bank lenders and a few financial REITs.
-
Time to Consider Foreign BondsIn 2023, foreign bonds deserve a place on the fringes of a total-return-oriented fixed-income portfolio.
-
The 5 Safest Vanguard Funds to Own in a Volatile Marketrecession The safest Vanguard funds can help prepare investors for continued market tumult, but without high fees.
