Due to the alluring combination of robust yields and steadily
rising distributions, master limited partnerships (MLPs) have
soared to the front of the income investment lexicon over the
past several years.
MLPs are defined by the fact that they generate at least 90
percent of their income from commodities, natural resources or
real estate holdings, they are entitled to a much more
cost-effective tax structure than traditional corporations. This
allows investors to enjoy solid payouts and yields while
deferring their tax obligations until they liquidate their MLP
MLPs also pay no taxes on the income they generate, rather the
obligation for taxes is passed onto unit holders, but it is not
based on the MLP's net income. These favorable tax factors
contribute to investors' love affair with MLPs and it is fair to
say the tax benefits of this asset class are widely known by
those that can be called "seasoned" MLP investors.
While MLPs are obviously quite different than traditionally
structured corporations, there is one thing they share in common
with regular stocks. Just as the biggest companies tend to garner
most of the mainstream financial media's attention, the same can
be said of MLPs as the likes of Enterprise Products (NYSE:
), Kinder Morgan (NYSE:
) and a few others are on the receiving end of most of the
mainstream attention paid to MLPs.
Not surprisingly, that also means there are some MLPs
currently flying under investors' radars that are worthy of
consideration this year.
Access Midstream Partners (NYSE:
) Access Midstream Partners operates as a natural gas gathering
MLP with operations in Texas, Louisiana, Oklahoma, Kansas,
Arkansas, West Virginia, and Pennsylvania. That means the company
has exposure to some of the most lucrative North American shale
plays such as the Barnett Shale, Haynesville Shale and the
Part of the reason that Access Midstream is not yet as well as
the Kinder Morgans of the MLP world is that this MLP simply is
not an old public company. Its units debuted in July 2010, but
investors that were lucky enough to buy and hold at that time
have enjoyed returns of over 54 percent along with eight
distribution increases. That is to say Access Midstream has
doubled its payout in less than three years.
Buy-rated at Deutsche Bank
. Perhaps more importantly, Access has seen some
voracious insider buying in recent weeks
. Remember, insiders sell for multiple reasons, but they only buy
for one: Because they think the stock is going higher. Access
currently yields 4.9 percent.
Western Gas Partners (NYSE:
) Like Access Midstream, Western Gas Partners is not the oldest
MLP on the block. It was spun off from Anadarko Petroluem (NYSE:
). Translation: Western Gas provides midstream energy services to
Anadarko in West Texas and the Rocky Mountains area, among other
Recent analyst action on the stock shows the sell-side is
expecting some upside in Western Gas
as two analysts have $56 price targets on the
units and one has a $54 target
. Splitting the difference at $55 is still decent upside from
Western Gas Partners yields four percent, which is mild by the
standards of many MLP
. However, it is worth noting the payout has grown by 67 percent
since late 2008.
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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