The best income stocks offer big dividends, decent share appreciation and rock-solid stability. And one of the best places to look for that triple-threat of a dividend stock is in the master limited partnership arena.
Master limited partnerships, or MLPs, are quirky investments. They have special tax rules, offering “distributions” instead of dividends to its “partners” or “unitholders.” But don’t let the jargon fool you. MLPs essentially are the same as dividend stocks, only their special corporate structure ensures that the vast majority of any profits are delivered right back to shareholders. Er, I mean “unitholders.” You get the idea.
Anyway, most MLPs exist in the energy arena, since the special partnership structure is designed for tax benefits in this capital-intensive but economically crucial sector. The thought is that the IRS can afford to cut these guys a break — so long as they return the lion’s share of profits to shareholders — since we need pipelines and other energy infrastructure.
It’s a win-win — companies get a favorable tax structure and investors get big-time payouts in businesses that have almost no competition and very robust baseline demand.
So what are the top MLPs out there? Here are three to consider.