Master limited partnerships trade like stocks, on stock exchanges or over-the-counter. Some MLPs have annual payouts of 6 percent or higher.
Bad news. Those distributions won’t qualify at 15 percent, as corporate dividends.
Good news. The bad news isn’t really so bad, though, because most MLP distributions get favorable tax treatment, too: typically, only 10 percent-20 percent of distributions are taxed currently, with the rest of the tax bill deferred until investors’ units are sold.
Among MLPs with high payouts are “midstream shippers of natural gas,” companies involved in transporting, processing, and storing that commodity. Companies to consider include Kinder Morgan Energy Partners, TEPPCO Partners, Enterprise Products Partners, and Inergy.
These MLPs may offer yields in the 6 percent-7 percent range, but they’re not bonds so their distributions can drop. Generally, though, such companies have performed relatively well over the past five years.
