Income-oriented investors who love high yield dividend stocks have long favored master limited partnerships, or MLPs. These publicly traded companies combine the tax benefits of a limited partnership but feature the liquidity of regular stocks, and must pay investors required quarterly dividends.
And those high dividend yields can be tempting. On average, master limited partnerships are yielding roughly 7% right now – while stocks in the S&P 500 average dividend yields of only about 1.9%.
You used to be able to find MLPs all over the stock market. Now, tax codes and federal regulations have largely sequestered master limited partnerships to the energy sector. While you’ll occasionally find a rare MLP among real estate firms or investment banks (Blackstone Group (BX), for example), the vast majority are in oil and gas storage and pipelines. And with speculation that increased demand for oil and natural gas will demand more pipeline use, master limited partnerships are gaining a lot of momentum on Wall Street right now. The idea of a hefty yield from a stock in a growing industry is music to many traders’ ears.
If you’re interest is piqued, however, beware. While energy-related MLPs are gaining momentum right now, they can also be volatile – especially when interest rates get ratcheted up. MLPs increase yields by adding pipelines or facilities, either through acquisition or as new constructions. Projects like this demand big financing, and higher interest rates increase the capital costs of MLPs. And if a rate hike also slows the economy and pinches off crude oil demand, then you can expect master limited partnerships that operate energy pipelines to get burned twice.
That said, if you’re bullish on the economy and you think that rates will remain low, MLPs may be right for you. Here are 19 master limited partnerships with a yield of more than 6% that could be worth a look to dividend investors:
SYMBOL |
MASTER LIMITED PARTNERSHIP | YIELD % |
Cheniere Energy Partners L P |
9.44% | |
Holly Energy Partners LP |
8.97% | |
TransMontaigne Partners LP |
8.29% | |
Regency Energy Partners LP |
7.83% | |
Enbridge Energy Partners LP |
7.62% | |
Targa Resources Partners LP |
7.59% | |
TC PipeLines LP |
7.52% | |
Energy Transfer Partners LP |
7.34% | |
Genesis Energy LP |
7.23% | |
DCP Midstream Partners LP |
7.16% | |
Oneok Partners LP |
6.92% | |
NuStar Energy LP |
6.83% | |
Boardwalk Pipeline Partners LP |
6.77% | |
Duncan Energy Partners LP |
6.46% | |
Plains All American Pipeline LP |
6.30% | |
Kinder Morgan Energy Partners LP |
6.29% | |
Sunoco Logistics Partners LP |
6.18% | |
Buckeye Partners LP |
6.13% | |
Energy Transfer Equity LP |
6.11% |