Many energy companies have assets that generate a consistent income over time. For instance, a natural gas pipeline will transport a predictable amount of gas through it each year, generating very stable revenues. These stable revenues often lead to a distribution of earnings to shareholders in the form of a dividend. Unfortunately, investors are double taxed when standard corporations issue dividends – once when the company earns the revenue (corporate income tax) and once when the dividends are paid out (personal income tax). Master limited partnerships (MLPs) solve this problem by eliminating double taxation for revenues derived from qualified sources – as determined by the U.S. Internal Revenue Service. These sources include almost all activities associated with the production, processing or transportation of oil, natural gas and coal assets in the U.S. [for more MLP news and analysis subscribe to our free newsletter].
The planned 1,897-kilometer Keystone XL Pipeline would transport up to 830,000 barrels of tar sands oil per day from the Western Canadian Sedimentary Basin in Hardisty, Alberta to the existing Keystone Pipeline system in Steele City, Nebraska. By building this pipeline, the goal is to increase crude oil delivery to existing refinery markets in the Texas Gulf Coast region [for more commodity news and analysis subscribe to our free newsletter].
The new year has proven to be surprisingly kind to equity investors as “risk on” sentiment has prevailed on Wall Street. Nonetheless, savvy investors remain wary as stocks can just as easily give up all of the profits accumulated on the year, if not more, at the first signs of economic turmoil. With interest rates around the globe expected to remain at ultra-low levels throughout 2013, the hunt for meaningful yield continues, which brings our focus to the newly launched Junior MLP ETF (MLPJ) from Global X [for more MLP news and analysis subscribe to our free newsletter].
When rates hover around zero, investors often find themselves looking towards more “exotic” asset classes to gain yield. Everything from convertible bonds to emerging market debt becomes commonplace in portfolios. One of the more popular choices is master limited partnerships or MLPs. The corporate tax structure allows for investors and the sponsoring companies to reap some pretty nice benefits, including big dividend distributions [for more MLP news and analysis subscribe to our free newsletter].
The MLP ETF space can add one more to its list, as the 12th fund made its debut on Friday. The iPath S&P MLP ETN (IMLP) hit the market and looks to compete with some of the biggest names in the space. The MLP sector has been one of the most talked about in recent years as paltry yields around the fixed income sector have led to investors finding their dividends in different places [for more MLP news and analysis subscribe to our free newsletter].
Investors knew that the results of the election would bode well for some asset classes and be a hindrance for others, and it appears that one of the losers has come out of the weeds. The MLP sector has been stuck in a downward spiral since Barack Obama was announced the winner of his second presidential term. Romney’s policies were largely considered to be more beneficial for big oil and gas with projects like the Keystone XL Pipeline approval, among others [for more MLP news and analysis subscribe to our free newsletter].
Darren Schuringa is the founder of Yorkville Capital Management, a Global Investment Performance Standards (GIPS) Compliant Registered Investment Adviser (RIA) who offers research depth on MLPs that often exceeds existing industry efforts. Yorkville Capital’s sister company, Yorkville ETF Advisors, launched the Yorkville High Income MLP ETF (YMLP) in 2012. The fund that tracks the Solactive High Income MLP Index and focuses primarily on high quality yield opportunities in the commodity MLP segment with investments in natural resources, marine transportation, propane, and exploration & production partnerships. It employs a rules-based investment strategy that emphasizes quality and quantity of distribution by placing current income, distribution coverage ratio and distribution growth foremost [for more MLP news and analysis subscribe to our free newsletter].