Thursday, October 23, 2008

Highest Yielding Income Partnership Stocks over 8%

Income partnerships, generally known as Master Limited Partnerships or MLP's or US Income Partnerships, are investments that are similar to income royalty trusts, except that they are structured as limited partnerships. MLP's have certain advantages over regular stocks with high dividends. There is no double taxation because the income is passed through without being taxed at the corporate level. Also, they can pass through tax deductions. However, there are a couple issues you should be aware of, that make them different from income trusts.

For example, income partnerships don't send out 1099 forms, they send out a Schedule K-1 Form, and the income is reported on your tax return differently from regular dividends. In addition, you should never, ever put an MLP into a retirement plan because of the UBTI or Unrelated Business Taxable Income problem, which could put the tax deferred status of your retirement plan in jeopardy, based on what I understand. MLP closed end funds should not be a problem. However, since I am not an accountant, please discuss MLP's with your accountant or CPA for clarification, before investing in MLPs.

Most MLP's are generally involved in pipeline businesses, usually oil and gas, and usually have very high dividends. Here are some with some high yields.

Terra Nitrogen Company, L.P. (TNH) a Sioux City, Iowa based company producer and distributor of nitrogen fertilizer products, has a yield of over 16.9%. They distribute anhydrous ammonia and urea ammonium nitrate solutions. This New York Stock Exchange company has a P/E of 6.

Atlas Pipeline Partners LP (APL) is a Pennsylvania based company natural gas distributor with approximately 7,900 miles of intrastate gas gathering pipelines, that yields 16.5%. They have a forward P/E of 7 and a PEG of 2.56.

Rio Vista Energy Partners LP (RVEP), a producer of oil and natural gas, yields 16%. Earnings have recently been negative.

Teekay LNG Partners LP. (TGP) is a marine transportation company which yields 15%. They transport liquefied natural gas, liquefied petroleum gas, and crude oil. The stock has a forward PE of 9 and a PEG of 1.99.

Ferrellgas Partners LP (FGP), the propane distribution company, has a yield of 12.3%. This Overland Park, Kansas company distributes gas throughout the US. The stock has a P/E of 40 and a PEG of 2.88.

Another high yield partnership is Energy Transfer Partners L.P. (ETP) which has a payout of 9.8%. The company is in the business of transporting and storing natural gas through its pipelines. The stock, which trades on the NYSE, has a P/E of 9.

You can find an Excel spreadsheet list of over a dozen master limited partnerships, which can be downloaded, sorted, added to and changed, at

Author does not own any of the above.

By Fred Fuld at

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