CHICAGO, June 8, 2011 /PRNewswire/ -- Today, Zacks
Investment Ideas feature highlights Features: TC PipeLines,
LP (Nasdaq: TCLP), Plains All American Pipeline, L.P.
(NYSE: PAA), Buckeye Partners LP (NYSE: BPL) and ONEOK
Partners, L.P. (NYSE: OKS).
(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)
4 MLPs with Yields Above 5%
Investors shaken by the weak economic reports and subsequent
market pullback should consider adding some defensive names to
their portfolio. One of the best ways to do that is by investing in
a Master Limited Partnership.
Although not all MLPs are immune to bear markets and recessions,
those with attractive (and sustainable) distribution yields should
hold up quite well.
Unitholders, Not Shareholders
Master Limited Partnerships raise capital by issuing units,
which act much like common shares. Investors buy units of the
partnership and are referred to as "unitholders" rather than
shareholders.
The MLP itself is not taxed as an entity as it passes through
the bulk of its income to unitholders through "quarterly required
distributions" (QRD). The unitholders are the only ones that pay
taxes, unlike dividends which get taxed at both the corporate and
individual level.
MLPs typically operate in low risk, slow-growth industries like
oil and natural gas pipelines. Cash flow is usually strong and
distributions stable over time.
These strong and stable distributions should provide limited
downside risk in a weak market as yield-hungry investors move in
and bid up the price.
A Great Defensive Play
For investors wanting to add some defense to their portfolio
while generating solid income, MLPs can be a great addition. Below
are 4 MLPs that should hold up well in a choppy market. Neither one
cut their distribution during the Great Recession and all currently
yield more than 5%.
TC PipeLines, LP (Nasdaq: TCLP) was formed by TransCanada
PipeLines Limited to acquire, own and actively participate in the
management of U.S.-based natural gas pipelines and related assets.
It is headquartered in Houston,
Texas has a market cap of $2.4
billion.
Earnings estimates have been surging for the MLP as it delivered
an average positive earnings surprise of 23% over the last 4
quarters.
TC PipeLines has a stellar history of consistently raising its
distribution. It currently yields a hefty 6.5%.
Plains All American Pipeline, L.P. (NYSE: PAA) is a
Master Limited Partnership engaged in interstate and intrastate
marketing, transportation and terminalling of crude oil. It is also
headquartered in Houston, Texas
and has a market cap of $9.1
billion.
Consensus estimates have been screaming higher for PAA over the
last few months as the partnership has delivered three consecutive
positive earnings surprises.
Plains pays a distribution that yields an attractive 6.3%. It
also has a history of steadily raising its distribution over the
last 10 years.
Buckeye Partners LP (NYSE: BPL) receives petroleum
products from refineries, connecting pipelines and marine
terminals, and transports those products to other locations. It has
a market cap of $5.3 billion and,
yes, it is headquartered in Houston,
Texas too.
It pays a distribution that yields a juicy 6.4%. Buckeye has
been consistently raising its distribution over the last decade,
even during the Great Recession.
ONEOK Partners, L.P. (NYSE: OKS) is an MLP engaged in the
gathering, processing, storage and transportation of natural gas in
the U.S. It is headquartered in Tulsa,
Oklahoma and has a market cap of $8.2
billion.
Earnings estimates have been steadily rising for OKS over the
last several months as it has put together three consecutive
positive earnings surprises.
The partnership also has a solid track record of raising its
distribution. It currently yields 5.6%.
Conclusion
With attractive yields and a solid history of rising
distributions, these MLPs provide a safe haven in a choppy
market.
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