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 has garnered interest over the years are Master Limited Partnerships. Investors are drawn to MLPs for their high yields and tax deferment. 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 that 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 |
Encore Energy Partners LP (NYSE: ENP) |
$1,038 |
8.7% |
|
2 |
Cheniere Energy Partners LP (NYSE: CQP) |
$3,641 |
7.6% |
|
3 |
Breitburn Energy Partners LP (Nasdaq: BBEP) |
$1,301 |
7.4% |
|
4 |
Ferrellgas Partners LP (NYSE: FGP) |
$1,988 |
7.1% |
|
5 |
Niska Gas Storage Partners LLC |
$1,366 |
6.9% |
|
6 |
Inergy LP |
$4,508 |
6.9% |
|
7 |
Legacy Reserves LP (Nasdaq: LGCY) |
$1,328 |
6.8% |
|
8 |
EV Energy Partners LP (Nasdaq: EVEP) |
$1,375 |
6.7% |
|
9 |
Linn Energy, LLC (Nasdaq: LINE) |
$6,252 |
6.6% |
|
10 |
Energy Transfer Partners LP (NYSE: ETP) |
$10,418 |
6.6% |
|
11 |
Penn Virginia Resource Partners LP |
$1,491 |
6.6% |
|
12 |
Regency Energy Partners LP (Nasdaq: RGNC) |
$3,789 |
6.5% |
|
13 |
Targa Resources Partners LP (Nasdaq: NGLS) |
$2,894 |
6.4% |
|
14 |
Copano Energy LLC (Nasdaq: CPNO) |
$2,372 |
6.4% |
|
15 |
Boardwalk Pipeline Partners LP (NYSE: BWP) |
$6,353 |
6.3% |
|
16 |
Kinder Morgan Energy Partners LP (NYSE: KMP) |
$23,163 |
6.3% |
|
17 |
NuStar Energy LP (NYSE: NS) |
$4,475 |
6.2% |
|
18 |
Enbridge Energy Partners LP (NYSE: EEP) |
$8,402 |
6.2% |
|
19 |
Buckeye Partners LP (NYSE: BPL) |
$5,501 |
6.1% |
|
20 |
Natural Resource Partners LP (NYSE: NLP) |
$3,784 |
6.1% |
|
21 |
Pioneer Southwest Energy Partners LP (NYSE: PSE) |
$1,116 |
5.9% |
|
22 |
Suburban Propane Partners LP (NYSE: SPH) |
$2,046 |
5.9% |
|
23 |
Penn Virginia GP Holdings LP (NYSE: PVG) |
$1,034 |
5.9% |
|
24 |
Plains All American Pipeline LP (NYSE: PAA) |
$9,203 |
5.9% |
|
25 |
DCP Midstream Partners LP (NYSE: DPM) |
$1,713 |
5.8% |
Source: NAPTP; 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."
