Master Limited Partnership

 Do you want to learn about an investing idea that you probably have never heard of? Well you have found the perfect place to get your knowledge up. They are called Master Limited Partnership companies. I like to refer to them as the connectors of natural resources to the people who use the resources. Why you ask? Because they own the pipelines and the technology to effectively extract gas, coal or oil from the ground and transport them to refineries.

 This simple business model that is steadily becoming more popular in the world of business can yield you a good cash flow on a quarterly basis. If you want to compare them to a similar investment then you can research REIT’s. (Real Estate Investment Trusts) To qualify for MLP status, a partnership must generate at least 90 percent of its income from what the Internal Revenue Service (IRS) deems “qualifying” sources. For many MLPs, these include all manner of activities related to the production, processing or transportation of oil, natural gas and coal

Examples of some Notable MLP’s:

Kinder Morgan Energy Partners – KMP

Enterprise Products Partners – EPD

Williams Partners – WLP

Energy Transfer Partners – ETP

Plains All American Pipeline – PAA

I have read many articles stating that these investments offer more risk than traditional investments. I tend to only invest money that I am willing to play with, that way I will not be scared if I lost it. I also like to reinvest the quarterly dividends into either a new stock or back into the actual investment. Doing this gives me two options, one of these offers me greater diversification protection, and the other doesn’t. You have to analyze the risk of the investment that you can tolerate.

I also am very cautious when investing in companies who have not been in business more than 10 years. If I do invest in one that has not been around a long time, it is because I plan to get out in a year or two. When it comes to long term investments, I stick to either mutual funds or stock companies that have been around over 10 years and are highly reputable with low debt burdens. Another good thing to consider is that as long as great utilities are in business, then these Master Limited Partnership companies (MLP’s) should have a steady influx of revenue as they provide a service to many oil and natural gas companies.  

Investopedia Info: http://www.investopedia.com/articles/basics/07/ml_partnerships.asp#axzz2HJStATQz

Here is the link to the Wikipedia Description: MLP- http://en.wikipedia.org/wiki/Master_limited_partnership

Comment if you might look into Master Limited Partnership’s now as a possible future investment?

Rich Uncle EL

-The tax implications to an investment like this are very different than stocks and bonds so please consult with a tax professional before making any moves.