Sunday, September 09, 2012

Exotic High Yield Master Limited Partnerships Yielding up to 10%

When investors think of MLPs or Master Limited Partnerships, they usually think of companies involved in energy, including oil, gas, and coal exploration, production, refining, and transportation. However, there are more than half a dozen MLPs in what I would call exotic industries, everything from fertilizer to sand to amusement parks to nuts. Six of these exotic MLPs have yields in excess of 3%, according to

MLPs are investment vehicles that are similar to income royalty trusts, except that they are structured as limited partnerships. MLP's differ from high income stocks in several ways. Since they pass through income without being taxed at the corporate level, they avoid double taxation. Plus, MLPs can pass through tax deductions.

However, they differ from income royalty trusts in several ways. MLPs shouldn’t be put into a retirement plan because of the UBTI or Unrelated Business Taxable Income problem, which could put the tax deferred status of retirement plans in jeopardy. This issue is beyond the scope of this article but you should definitely talk to your accountant about the tax consequences. Also, MLPs don't send out 1099 forms, they send out a Schedule K-1 Form, and the income is reported differently on tax returns. This may mean extra time and hassle when you or your accountant prepare your taxes.

One example is Terra Nitrogen Company, L.P. (TNH) pays a yield of 7.9%. This Sioux City, Iowa based company produces and distributes nitrogen fertilizer products, such as anhydrous ammonia and urea ammonium nitrate solutions. The company, which trades on the New York Stock Exchange, has a price to earnings ratio of 13.1. Earnings for the latest quarter were up 18.3% on relatively flat revenues. Dividends have been paid since April of 1992.

Stonemor Partners LP (STON) is in the business of operating cemeteries across the United States. This Levittown, Pennsylvania based company was founded in 1999, and has cemeteries in 26 states and funeral homes in 18 states. The MLP yields 9.8% and pays quarterly. Earnings for the latest quarter were negative on a 2.3% increase in revenues.

Cedar Fair LP (FUN) has a great stock ticker symbol. I owns 11 amusement parks, seven water parks, and five hotels. The company was founded in Sandusky, Ohio in 1983. The company trades at 14.6 times trailing earnings, 12.7 times forward earnings, and a yield of 4.9%. Earnings were up an incredible 748.2% on an amazing 25.7% boost in sales.

For a free list of all of the top exotic master limited partnerships including one which pays more than 13%, which can be downloaded, updated, and sorted, go to

Disclosure: Author did not own any of the above at the time the article was written.


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