| MLPs for income and growth |
| Monday, October 19, 2009 |
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"On the currency front, globally traded commodities like oil trade in dollars. As the greenback falls, producers naturally demand higher prices to compensate for the lost value of the dollars they’re receiving. "Meanwhile, global oil demand is continuing to rise. How do you profit, conservatively? We recommend the MLP & Strategic Equity Fund, a closed-end fund that behaves more like an ETF than a traditional open-ended mutual fund. "Its value fluctuates based on investor demand for its shares and on the performance of its underlying holdings — shares of the major master limited partnerships, or MLPs, that are active in the energy markets. "Each of these MLPs — including Kinder Morgan Management, Plains All American Pipeline, Enterprise Products Partners, and ONEOK Partners — operates storage and pipeline facilities utilized by the major oil and gas producers and shippers. "They’re more conservative than most other energy companies; the cash flow generated from energy distribution is generally more stable than the cash flow from energy production. "That’s why MLPs are usually able to pay generous, steady dividends to their shareholders. And that’s why they are especially attractive to income-oriented investors. "MTP is yielding about 7%, much better than you can get on an equivalent Treasury. Plus, it’s trading at a slight discount to its net asset value. So we think now’s a good time to buy." |
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