The Pitfalls and Payoffs of MLPs

The following video is part of our "Motley Fool Conversations" series, in which Motley Fool contributor and financial planner Dan Caplinger discusses topics from around the investment world.

Today, Dan looks at master limited partnerships and their potential risks and rewards. With their wide exposure to the natural resources industry, MLPs have gained in popularity because of their tax benefits and high dividend yields. Dan looks at various ways to invest in MLPs, providing some specific names of MLPs with interesting opportunities, and also points out some of the complications that investors in MLPs have to face.

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Fool contributor Dan Caplinger has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On June 19, 2012, at 5:06 PM, stevec5792 wrote:

    Dan, the biggest drawback I find to MLPs is not the Federal Tax but the various State Taxes you have to pay. A large MLP, such as Kinder Morgan (KMP), has pipelines and terminals in many states. Any income generated in those various states would require a tax return in those states. That is the biggest drawback to the small investor. I avoid those simply because of that.

    I do use AMLP to get exposure, knowing the "double" taxation issue. Distributions are still good and can be used without issues in a tax-deferred account.

    Another option is to own the General Partner, KMI for Kinder Morgan. That also gets you exposure but without the tax complications although the "double" taxation exists in these as well.

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