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Old 08-17-2006, 07:27 PM   #1
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Join Date: Apr 2003
Location: Hooverville
Posts: 22,535

This is a reprint on the Crosstex Energy website of a primer on energy MLPs created by A.G.Edwards. This is a very positive look. There are negatives which they mention, but do not stress. Nevertheless, I feel that well chosen MLPs can be excellent cash flow investments for people nearing or in retirement. I have mentioned in the past that for 20 years I have owned units in one MLP that now pay me half my initial investment every year, and has been doing so for 3 or 4 years now. I bought in 1986, and by the early nineties I was cashed out. Plus, the units market value has increased 10x .

I think this is an unusually good outcome, but there have been many good outcomes in this area. Since I have more money now, I am usually more interested in the parent companies, often pipelines, that sponsor these entities.

One thing to note (and this was mentioned in the article linked) is that MLPs are not suitable for IRAs or other tax sheltered accounts because of the possibility of getting "unrelated business taxable income". However, the distributions themselves are to a greater or lesser extent tax advantaged, so they do well in a taxable account. Something I did not know but is mentioned in this article, is that since much the distribution is not considered income, it can be more sparing as regards the taxability of your social security payments than other tax advantaged investments such as municipal bonds.

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