[dropcap]A:[/dropcap] According to the Oppenheimer Mutual Fund Company, over the past 15 years Master Limited Partnerships (MLPs) have experienced a 17 percent annual average rate of return, compared to 7 percent for the Standard & Poor’s 500. Cumulatively, that computes to 938 percent for MLPs compared to 157 percent for the S&P 500. While not appropriate for everyone, we feel every investor should at least assess the potential of MLPs for their portfolios.
MLPs own the backbone of America’s energy infrastructure (drilling, transporting, storing and ultimately delivering capabilities) for oil and gas products. This is so important that Congress created a special tax status and corporate structure (MLPs) to promote the production and delivery of these critical resources. In the past few years, the U.S. has discovered huge deposits of both oil and gas which may soon turn our country into an energy exporter instead of an importer. The technology to extract these vast new assets is already available, but the transportation and storage capabilities (“midstream”) are currently the weak links in the energy chain – and may offer the biggest investment opportunities.
Many stocks or mutual funds are purchased primarily in hopes of selling them later for a higher price – a capital gain. While this is also a goal for MLPs, their main focus is to generate income by owning and then leasing pipelines and storage tanks to major oil and gas companies. The long-term leases can provide a steady income – which is impacted less by the current price of oil or the gyrations of the stock market.
The investment world is constantly changing, and your portfolio should adjust accordingly. Like all equities, MLP’s are not guaranteed by FDIC, may make or lose money, and may raise or lower the amount of interest they pay. It is always important to obtain professional advice before investing.
BY: Bill and Cindi Porter
Aileron Investment Advisors
The views expressed in this article are not necessarily that of Suwanee Magazine.
