Energy Master Limited Partnerships

Energy MLPs make money off fees charged for moving oil and gas through their pipelines or storage facilities. They're required to pay out more than 90% of their cash flows as distributions to investors, and they currently yield 6%, on average, according to the Alerian MLP Index.

With domestic oil-and-gas production booming, MLPs should generate solid long-term returns, says Curt Pabst, managing director with Eagle Global Advisors, an advisory firm based in Houston that uses MLPs for clients. Many MLPs have hiked their distributions more than 10% this year, he adds, a sign that the industry is "fundamentally healthy."

"They're making more money than most people expected and they're passing that on to investors," he says.

MLP valuations remain reasonable compared to Real Estate Investment Trusts and other "yield investments," adds Pabst. And MLPs usually don't move closely in tandem with traditional stocks and bonds, providing some diversification.

Source:  Darren Fonda, Fidelity Investments

Global X MLP (MLPA) and Global X MLP & Energy Infrastructure (MLPX) are components of the D2 Capital Management Multi-Asset Income Portfolio.  They yield 5.79% and 2.73, respectively (as of 27 November).

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 

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