Investing in MLPs: Three Set to Soar on Shale Expansion - Money ...

By Don Miller, Contributing Writer, Money Morning

February 21, 2013

Money Morning

Text size

If you're one of the millions of investors trying to find decent yielding income investments, there's one place you should be looking -- Master Limited Partnerships (MLPs).

That's because if you play your cards right you can pocket a cool 6% to 10% or more from investing in MLPs - while the yield on the broad market barely cracks 2%.

As an added bonus, 80% to 90% of distributions from MLPs are tax-free until you sell.

As America's newfound shale formations spew forth million of barrels of oil and gas an infrastructure boom will be needed to store and ship it.

And a few select MLPs will be primed to cash in.

From the Well to the Pump: Investing in Midstream MLPs

Back in 1986, Congress passed a sweeping tax act to speed up the development of domestic energy resources.

The new law created tax-free partnerships to promote investment in "midstream" energy assets--the companies that connect producing fields (upstream) with refineries and retail sales (downstream).

These midstream MLPs profit from the flow of energy, transporting it from place to place with large pipelines and/or storing it in terminals.

Thing is, it doesn't matter whether the price of oil and gas goes up or down -- midstreams get a steady stream of profits either way.

"When you invest in the midstream, you're far less susceptible to price fluctuations in the underlying commodity, and you are able to collect easy profits from the growing demand in fuels," explains Money Morning Global Energy Strategist Dr. Kent Moors, who holds many MLPs in his Energy Advantage investment service.

Over the past 10 years, $1,000 invested in the Alerian MLP Index would have grown to nearly $4,500 today with distributions reinvested-an annualized return of 16%.

Meanwhile, a $1,000 investment in the S&P 500 Index with dividends reinvested would have grown to a little more than $2,000 - a return of 7%, not counting taxes that would have been owed.

And now the shale revolution transforming the North American natural gas and oil markets is giving MLPs a wave of new opportunities that should allow them to expand distributions to investors.

You see, the glut of natural gas and oil from vast shale plays like the Bakken and Eagle Ford will require significant investment in infrastructure to transport, refine and distribute what's being extracted from the ground.

In fact, the Interstate Natural Gas Association of America estimates investment in infrastructure in natural gas and oil pipelines will grow by $251 billion over the next 25 years in the U.S. and Canada.

The completion of major pipeline projects to move and store the glut of crude oil and natural gas will be a turning point for the North American energy industry.

Here are three midstream companies with juicy yields that will be on the leading edge of the boom.

The remaining content is exclusively for Money Morning subscribers. To gain access, enter your email address:

Source: http://moneymorning.com/2013/02/21/investing-in-mlps-three-set-to-soar-on-shale-expansion/

Ron Palillo Chad Johnson Twitter Helen Gurley Brown Kathi Goertzen Johnny Pesky spice girls justin theroux