Master Limited Partnerships (MLPs) – High Yields Ahead

The low yield / negative yield environment resulting from central bank actions has left many investors perplexed as we are head into uncharted territories. Investment Guru, Charlie Munger, recently was quoted saying “If interest rates go to zero and all the governments in the world print money like crazy and prices go down – of course I’m confused. Anybody who is intelligent who is not confused doesn’t understand the situation very well. If you find it puzzling, your brain is working correctly.”

Given the low yield world we live in, we have decided to preview certain MLPs which would provide investors a decent yield over the 5 year Treasury Bond Rate.

  • AMJ – JPMorgan Alerian MLP ETN (3 month – 20%)

  • MLPI – ETracs Alerian MLP Infrastructure Index ETN (3 month – 20%)

  • MLPN – Credit Suisse X-Links Cushing MLP Infrastructure ET (3 month – 30%)

AMJ, JPMorgan’s Alerian MLP Exchange Traded Note, provides investors a way to gain exposure to midstream energy MLPs. AMJ pays a variable quarterly coupon linked to the cash distributions paid on the MLPs in the index, less accrued tracking fee, which is approximately 0.85% per annum. AMJ’s top three holdings are Enterprise Products Partners, Energy Transfer Partners and Magellan Midstream Partners. It is currently yielding around 6.9%.

MLPI, UBS’ ETracs Alerian MLP Infrastructure Index ETN, is designed to track the performance of the Alerian MLP Infrastructure Index and pay a variable quarterly coupon linked to the cash distributions of the MLP’s in the index, less accrued tracking fee, which is also 0.85% per annum. It’s top three holdings are Enterprise Products Partners LP, Magellan Midstream Partners LP, and Energy Transfer Partners LP. It is currently yielding on an annualized basis approximately 6.33%.

MLPN, Credit Suisse’s  X-Links Cushing MLP Infrastructure ETNs that are designed to provide investors with exposure to the Cushing 30 MLP Index and may pay a variable quarterly coupon linked to the cash distributions paid on the constituent MLPs in the Index, less applicable fees which approximate 0.85% per annum. It’s holdings are relatively equally distributed, with Energy Transfer Equity LP (largest holding) making up 3.53% of the entire fund. It is currently yielding on an annualized basis approximately 7.26%.

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