Daily Dividend: Revisiting High MLP Fund Payouts (AMLP, MLPN, SRV, AMJ, KYN, NTG)

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Now that the nuclear woes in Japan have elevated interest in more traditional power sources and now that the 10-Year Treasury Note yield dropped from 3.55% early last week to about 3.25%, we wanted to revisit opportunities for high income for investors in the world of Master Limited Partnerships (or MLPs).  In this effort, we focused solely on the “exchange traded product” category with closed-end funds, ETFs, and ETNs.  We also skipped the leveraged plays and less liquid entities in the exchange traded products.

Our screen brought up the names ALPS Alerian MLP ETF (NYSE: AMLP), Credit Suisse Cushing 30 MLP Index ETN (NYSE: MLPN), The Cushing MLP Total Return Fund (NYSE: SRV), JPMorgan Alerian MLP Index ETN (NYSE: AMJ), Kayne Anderson MLP Investment Company (NYSE: KYN), and Tortoise MLP Fund, Inc. (NYSE: NTG).

Be advised that most investors consider these payouts as dividends rather than the equivalent return of capital (non-taxed with depreciation considerations) that these are generally taxed as.  Investors also need to more closely discuss the taxation of these with their tax professionals before just buying these instruments because the taxation is generally much different.  Investors also need to be aware that the underlying operations that make these products up often have secondary offerings to support growth and their dividend payouts often fluctuate similar to that of REITs due to fluctuations in their earnings.

ALPS Alerian MLP ETF (NYSE: AMLP) paid $0.243 last quarter, which would come to roughly 6% in yield based on a $15.95 share price if the payouts were to remain static.  The 52-week trading range is $15.01 to $16.61.

Credit Suisse Cushing 30 MLP Index ETN (NYSE: MLPN) paid out $0.295 last quarter, which would come to roughly 4.9% in yield based on a $24.00 share price if the payouts were to remain static.  The 52-week trading range is $17.41 to $26.08.

The Cushing MLP Total Return Fund (NYSE: SRV) paid out $0.225 last quarter, which would come to roughly 8.7% in yield based on a $10.30 share price if the payouts were to remain static. The 52-week trading range is $7.53 to $11.14.

JPMorgan Alerian MLP Index ETN (NYSE: AMJ) paid out $0.444 last quarter, which would come to roughly 4.8% in yield based on a $36.35 share price if the payouts were to remain static. The 52-week trading range is $26.45 to $38.55.

Kayne Anderson MLP Investment Company (NYSE: KYN) paid out $0.485 last quarter, which would come to roughly 6.4% in yield based on a $30.35 share price if the payouts were to remain static. The 52-week trading range is $23.50 to $31.96.

Tortoise MLP Fund, Inc. (NYSE: NTG) paid out $0.4075 per share. This represents an annualized yield of 6.4 percent on the $25.35 share price if the payouts were to remain static. The 52-week trading range is $23.44 to $25.65.

There are some additional risks here in MLPs which are not necessarily the same as other more diversified oil and gas operators.  Rising oil prices are not uniformly good for the operations automatically.  These often have business models that are more similar to transportation or utility providers rather than the boom and bust for exploration and production operations.  There is no such thing as a free lunch in the world of dividends (or return of capital).  As always, know what you are investing in.

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JON C. OGG

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