Energy Business

MLP Sector Feels Wrath of Tax-Selling & Dividend Selling (AMJ, AMLP, EPD, KMP, KYN, SRV)

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Technically, the payouts from Master Limited Partnerships (MLPs) are distributions which include a substantial portion being a return of capital rather than just income. If these payouts are not dividends they should be mostly immune from the higher tax rates and the selling out of the dividend bubble. The reality is that this is just not the case.

The world of MLPs has been under fire since the election outcome. For starters, many investors have doubts and questions over the tax status that these entities would have since so much of the payouts here are exempt from taxes. The fallout has been wide. Many investors have held these tax-efficient vehicles and units for years as well, and they are largely sitting on vast capital gains.

JPMorgan Alerian MLP Index ETN (NYSEMKT: AMJ) closed at $40.99 on November 6 and has fallen each day since as investors are locking in their long-term gains. Shares of this key ETF are currently threatening to close up on the day but the $38.82 price compares to $34.98 to $41.68.

ALPS Alerian MLP ETF (NYSEMKT: AMLP) closed at $16.43 if you adjust for that $0.256 payout the day after election and that is also down each day since. The shares of this ETF are now down to $15.84 against a 52-week range of $15.19 to $17.19.

Enterprise Products Partners L.P. (NYSE: EPD) is up on the day by just over 1% at $50.95 against a 52-week range of $44.09 to $55.38. The units here were at $53.62 on the closing day of the election and the payout rate is currently 5.1%.

Kinder Morgan Energy Partners, L.P. (NYSE: KMP) is down 0.5% a $78.52 and these units were at $83.58 on the day of the election. The implied payout here is 6.3% and the 52-week range is $74.15 to $90.60.

Kayne Anderson MLP Investment Company (NYSE: KYN) is a key closed-end fund and with a 1.68% drop to $29.26 this one is down from $31.54 the day of the election. This fund has a 52-week range of $27.00 to $33.10 and its distribution rate is about 7.35% now that the fund’s shares have pulled back.

The Cushing MLP Total Return Fund (NYSE: SRV) is trying to stage a day of gains as its shares are up two cents to $7.92, but this fund was at $8.52 the day before the election and closed at $8.34 the day of the election. It also have a 52-week range of $7.43 as a new low today to $10.65 and its latest payout rate would be a distribution rate of 11%.

The sell-off on these has been large, but if you have seen what happens when the asset allocations move out of this sector there may be even more downside if the current concerns of higher taxes and higher scrutiny on “tax breaks for oil companies” remain in place.


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