24/7 Wall St. » EPE

Chasing Yield Via MLPs (ETE, ETP, RGNC, EPE, EPD, TRP, KMR, KYN, AMJ)

Administrator — Mon, 04 Oct 2010 18:27:28 +0000

Master limited partnerships are a unique investment class for the dividend-oriented and for the income-oriented investor alike. As they are MLP’s, they generally pass cash down to investors at higher rates than traditional dividends, and many are passed through as a return of capital rather than as traditional income… hence what is often a better tax situation in the new normal.

Morningstar’s Paul Larson gave several sector picks today in the MLP sector, most of which are true MLPs. Larson outlined Energy Transfer Equity, L.P. (NYSE: ETE). It owns the general partner of two other MLPs, Energy Transfer Partners (NYSE: ETP) and Regency Energy Partners (NASDAQ: RGNC) in natural gas transportation businesses and ETP also owns a propane distribution business.

Enterprise GP Holdings L.P. (NYSE: EPE) was also given a positive outlook from Larson, and this is involved in a stock merger with Enterprise Products Partners L.P. (NYSE: EPD) that is still a deal pending unitholder approval.

Larson also likes TransCanada Corp. (NYSE: TRP), although this is a pipeline company in Canada that is not structured as a MLP and its dividend yield of 4.1% is more straightforward without many of the traditional tax headaches associated with an MLP. Larson called it undervalued with a fair value estimate of $43.00 versus $37+ today. Another of his alternative picks is Kinder Morgan Management LLC (NYSE: KMR) as being basically a different share class of one of the largest MLPs, Kinder Morgan Energy Partners. Full Larson/Morningstar presentation

There are a couple of other means of investing in MLPs in a diversified manner that other pickers rarely make note of. Kayne Anderson MLP Investment Company (NYSE: KYN) and JPMorgan Alerian MLP Index ETN (NYSE: AMJ) offer diversification with a return of capital component that still replicates income for investors.

Kayne Anderson MLP Investment Company (NYSE: KYN) is a closed-end equity mutual fund launched and managed by KA Fund Advisors, LLC that invests in the public MLP sector. Its dividend can fluctuate and a recently announced payout of $0.48 per share for the last quarter is anticipated that a significant portion of the distribution will be treated as a return of capital for tax purposes. That $0.48 rate has been paid for seven quarters (down from $0.50 before) and it has sold more shares and the current implied yield (again, not exact because return of capital) and its $26.10 share price compares to a 52-week trading range of $20.03 to $27.54.

JPMorgan Alerian MLP Index ETN (NYSE: AMJ) is an exchange-traded note that has a spotty dividend history since its 2009 launch. If you smooth out the dividend it would have an implied yield of close to 5.2%. At $33.95, the 52-week trading range is $24.26 to $34.15.

Before you chase these yields just as routine dividends, you will need to learn the tax structure, as well as the limitations and implications in investing in this asset class.

JON C. OGG

Filed under: Analyst Calls, Commodities, Dividend, Mutual Funds, Oil & Gas, Tax Tagged: AMJ, EPD, EPE, ETE, ETP, KMR, KYN, RGNC, TRP

When Two Partners Quit, Will the Third One Sue? (EPD, EPE, TPP)

247wallst — Wed, 22 Apr 2009 14:19:24 +0000

Master limited partnership Enterprise Products Partners L.P. (NYSE:EPD) has announced that it will pull out of a partnership with an affiliate of Oiltanking Holdings America, Inc., a subsidiary of privately-held German firm Marquard & Bahls AG. Enterprise’s general partner, Enterprise GP Holdings L.P. (NYSE:EPE) also owns the general partner of TEPPCO Partners, L.P. (NYSE:TPP), the third partner in this joint venture. The reason for the split is only stated as a “disagreement” with Oiltanking.

The joint venture is/was an offshore crude oil port and pipeline system along the Gulf Coast of Texas that would have included 5.1 million barrels of storage capacity and a crude oil pipeline system with capacity of up to 1.8 million barrels/day. The project was slated to cost approximately $1.8 billion.

Enterprise will take a non-cash charge of about $34 million against second quarter 2009 earnings. Oiltanking has taken the position that the dissociation by Enterprise and TEPPCO is “wrongful and in breach” of the partnership agreement. Enterprise believes its actions are allowed by the agreement, and “should the need arise, intends to vigorously defend such actions.”

TEPPCO common units are up slightly this morning, while Enterprise and Enterprise GP are both down slightly.

Paul Ausick
April 22, 2009

Posted in Dividend, Law, Mergers and Buy Outs, Oil & Gas Tagged: EPD, EPE, TPP

Earlybird Analyst Calls (June 6, 2007)

247wallst — Wed, 06 Jun 2007 06:30:54 +0000

AGN started as Buy at Jefferies.
AW started as Outperform at Credit Suisse.
BAY started as Overweight at JPMorgan.
CACH cut to Neutral at Merriman Curhan Ford.
CIEN started as Outperform at Piper Jaffray.
CPNO started as Outperform at Morgan Keegan.
EPD started as Outperform at Morgan Keegan.
EPE started as market perform at Morgan Keegan.
ETE started as Outperform at Morgan Keegan.
ETP started as Outperform at Morgan Keegan.
GILD cut to Neutral at Credit Suisse.
IMA started as Buy at Stifel Nicolaus.
JCI raised to Outperform at Credit Suisse.
KMP started as Outperform at Morgan Keegan.
KSE raised to Neutral at Credit Suisse.
LOOP started as Buy at Sun Trust Robinson Humphrey.
MNT started as Buy at Jefferies.
NTEC started as Outperform at Rodman & Renshaw.
ORBC started as Outperform at CIBC.
RSG started as Outperform at Credit Suisse.
SINT cut to Hold at Stifel Nicolaus.
TEVA raised to Outperform at Credit Suisse.
VLTR cut to Sector Perform at CIBC.
VRUS started as Buy at B of A.
WMI started as Outperform at Credit Suisse.

Jon C. Ogg
June 6, 2007