Dividend investing is popular again. Investors have taken to heart Jeremy Siegel's studies, which show that higher-yielding stocks tend to offer greater returns over time than low- or no-yield stocks.
One particular area that has garnered interest over the years is master limited partnerships. Investors are drawn to MLPs for their high yields and tax deferral. MLPs don't pay taxes at the corporate level, so the tax burden then gets passed to the investor. Without getting into too much detail, because of structure of the partnerships and the distributions, investors are entitled to a serious tax deferral. Investors should fully understand what they are in for before buying MLPs, but for those willing to do the research it can be very profitable.
The highest yields can be very tantalizing. As long as a stock yielding 15% doesn't lose value, you'll make 15% in one year! In more cases than not, however, an astronomical yield is a bad sign for a stock. Since yields and stock prices move in opposite directions, a high yield usually means that investors have begun to worry about the business and driven down its stock price.
However, certain types of companies such, as MLPs, have to pay out most of their cash flow as distributions, so their yields will be higher than "normal." Dividends are not guaranteed; you need to make sure that a business is generating enough cash to pay its dividend, or your investment could be disastrous.
I ran a screen for the highest-yielding MLPs. The only limitation I've set is the MLPs must have a market cap greater than $1 billion.
Here are the top 25 highest-yielding MLPs the screen produced:
|
|
Company
|
Market Cap (in millions)
|
Yield
|
|
1
|
Cheniere Energy Partners LP. (AMEX: CQP )
|
$2,922
|
9.6%
|
|
2
|
Encore Energy Partners LP (NYSE: ENP )
|
$1,011
|
8.8%
|
|
3
|
Breitburn Energy Partners L.P. (Nasdaq: BBEP )
|
$1,222
|
8.0%
|
|
4
|
Terra Nitrogen Company, L.P.
|
$2,369
|
7.9%
|
|
5
|
Ferrellgas Partners LP (NYSE: FGP )
|
$1,981
|
7.7%
|
|
6
|
Inergy, L.P. (Nasdaq: NRGY )
|
$4,084
|
7.6%
|
|
7
|
Energy Transfer Partners L.P.
|
$9,904
|
7.5%
|
|
8
|
Penn Virginia Resource Partners LP (NYSE: PVR )
|
$1,836
|
7.4%
|
|
9
|
Boardwalk Pipeline Partners, LP
|
$5,604
|
7.2%
|
|
10
|
Niska Gas Storage Partners LLC
|
$1,312
|
7.2%
|
|
11
|
Regency Energy Partners LP
|
$3,674
|
7.0%
|
|
12
|
Copano Energy LLC
|
$2,218
|
6.9%
|
|
13
|
NuStar Energy L.P.
|
$4,100
|
6.8%
|
|
14
|
Linn Energy, LLC (Nasdaq: LINE )
|
$6,870
|
6.8%
|
|
15
|
Pioneer Southwest Energy Partners L.P.
|
$1,016
|
6.7%
|
|
16
|
Natural Resource Partners LP
|
$3,424
|
6.7%
|
|
17
|
Legacy Reserves LP
|
$1,390
|
6.7%
|
|
18
|
Enbridge Energy Partners LP
|
$7,842
|
6.6%
|
|
19
|
AmeriGas Partners LP
|
$2,593
|
6.6%
|
|
20
|
TC Pipelines LP
|
$2,134
|
6.5%
|
|
21
|
Targa Resources Partners LP
|
$2,929
|
6.5%
|
|
22
|
Suburban Propane Partners LP
|
$1,868
|
6.5%
|
|
23
|
Buckeye Partners LP
|
$5,888
|
6.3%
|
|
24
|
Plains All American Pipeline, L.P.
|
$9,282
|
6.2%
|
|
25
|
Holly Energy Partners L.P.
|
$1,215
|
6.2%
|
Sources: NAPTP, and Capital IQ, a division of Standard & Poor's.
These MLPs are a good place to start your research, but they're not formal recommendations. Remember, their seemingly irresistible yields could be ticking time bombs, so do your own due diligence. Also, make sure you diversify your picks across various sectors. As investors relearn every decade or so, you never want to put all your eggs in one basket -- no matter how tempting the yields are.
For a basket of some high-yield dividend opportunities, click here to get The Motley Fool's five-page free report: "13 High-Yielding Stocks to Buy Today."
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