An Investor's Guide to Massive Oil and Gas Dividends

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Despite the Federal Reserve's moves to start easing its economic stimulus, interest rates are still at record lows. This means investors continue to have no choice but to look for better yields in the stock market. One place that has really caught investors' attention are oil and gas master limited partnerships, where the top four offer an average distribution yield of 9%.

The business of an oil and gas MLP is pretty straightforward. These companies acquire mature oil and gas wells, hedge to lock in the cash flows associated with those wells, and then return nearly all of the excess cash flow to investors. That said, not all of these companies are that straightforward. This can make it difficult for investors to choose which one would fit best within their portfolio.

Some investors might want the security of owning top-dog LINN Energy  (NASDAQ: LINE  ) or its affiliate LinnCo  (NASDAQ: LNCO  ) . The acquisition machine now owns an interest in 19,000 producing wells throughout the U.S. Not only that, but thanks to its most recent acquisition, LINN Energy's production is quite balanced and its distribution is now rock solid.

Still, other investors are more interested in upside that can be offered by smaller operations like BreitBurn Energy Partners  (NASDAQ: BBEP  ) , Vanguard Natural Resources  (NASDAQ: VNR  )  , or EV Energy Partners  (NASDAQ: EVEP  ) . However, while all three are relatively the same size, there are major differences among them. For example, BreitBurn Energy Partners' production is heavy on oil, while Vanguard Natural Resources and EV Energy Partners lean heavily toward natural gas.

These are just some of the differences between these top four companies. To take an even deeper look, I've created the slideshow below to help investors decide which of these massive distributions belong in their portfolio.

Looking for more dividends?
One of the dirty secrets that few finance professionals will openly admit is the fact that dividend stocks as a group handily outperform their non-dividend-paying brethren. The reasons for this are too numerous to list here, but you can rest assured that it's true. However, knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.

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Matt DiLallo

Matthew is a Senior Energy and Materials Specialist with The Motley Fool. He graduated from the Liberty University with a degree in Biblical Studies and a Masters of Business Administration. You can follow him on Twitter for the latest news and analysis of the energy and materials industries:

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9/2/2015 2:50 PM
BBEP $2.70 Up +0.04 +1.54%
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LNCO $2.92 Down -0.01 -0.34%
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