Master Limited Partnerships

At any given point in time, there are pockets of tremendous value in the world of investment. “Master Limited Partnerships” (also called Publically Traded Partnerships) are an example of an investment that brings with it excellent growth prospects, mouth watering dividends, tax breaks and (as if that were not enough) promising upside potential.

At the moment they’re not widely known. But in a few years all that could well change.

What Are Master Limited Partnerships?
A MLP is a limited partnership where units (that may be owned by individuals or corporations) are available to trade on public exchanges including the New York Exchange and the NASDAQ. The buyer of units in a MLP becomes a partner.

Master Limited Partnerships may operate in several different industries – there are several available in energy (oil/gas/coal), real estate and more. They tend to operate within stable, necessary industries. There are also a number of indexes that follow the performance of MLPs including the Citigroup MPL Index & the Alerian Index.

Why MLP’s, And Why Now?

• At the moment MLPs are relatively undiscovered by mainstream investors and investment funds. After looking at the potential benefits they offer this could well change.

• MLPs typically offer good yields – expect income of between 10% to 15% per year (with tax breaks up for grabs). The MLP companies do not have to pay tax thanks to government legislation – which ultimately benefits investors in a big way. Many MLPs have also increased their dividend payouts regularly – this will ultimately attract a lot of new investment and increase the unit price.

• As investors and institutions discover MLPs a lot of cash will start to pour into these companies – this should increase their unit prices significantly.

• A change in legislation has meant that institutions are now allowed to place up to 25% of their overall assets in MLPs – previously, the majority of MLP investors were individuals but as more institutional money pours in, the unit prices of MLPs in general should increase.

Expect to see a greater coverage of MLPs over the next few years as individual and corporate investors begin to become aware of the benefits to be reaped.

Next: Riding the Gold Boom