MLP owners receive cash distributions — usually paid quarterly — from the business operations of the partnership. The cash distributions increse over time at around 6% per year and the annual yield averages 5.7%.
MLPs outperformed the S&P 500 every year from 1999-2011. They combine capital appreciation potential with steady yield to deliver high total returns.
MLPs do not pay corporate tax and the income they pay out is tax-deferred due to pipeline and infrastructure depreciation costs.
The U.S. is experienceing a boom in oil and natural gas production due to advancements in drilling technology. MLPs are uniquely positioned to take advantage of the boom with minimal commodity price exposure. Midstream MLPs generate revenues based on volumes transported, not the price of the commodity.
MLPs are puclicly traded on the NYSE and the NASDAQ. MLPs combine the tax advantages of a partnership with the liquidity of publicly traded securities..
If MLPs are left to an heir, the deferred tax bill is eliminated. The heir receives the MLPs at a new cost basis based on the market value of the units when they are passed on.
Master Limited Partnerships are limited partnerships that are publicly traded on a securities exchange. They combine the tax benefits of a partnership (pay no corporate taxes) with the liquidity of publicly traded securities. The modern day MLP got its start in 1986-87 when Congress passed the Tax Reform Act of 1986 and the Revenue Act of 1987. The new laws stated that to qualify as a Master Limited Partnership, an entity had to earn at least 90% of its income from qualified sources.
DeWitt Capital Management has a concentrated portfolio of energy infrastructure MLPs that provide long-term capital appreciation through distribution growth and an attractive level of current income.