Dividend Hunts, Diversifying Through MLPs (AMJ, MLPI, MLPN, KYN, KYE)

Being an income-oriented investor in chase of dividends and chasing returns of capital has driven many investors to Master Limited Partnerships, or MLPs, over the years.  With Treasuries paying next to nothing for short-term rates and with energy prices being relatively stable, this is a sector that may still hold up well.  Many investors have gone after the ETF and ETN products in the sector in order to avoid the risks of an individual partnership risk.  JPMorgan has the Alerian MLP Index ETN (NYSE: AMJ), UBS has the E-TRACS Alerian MLP Infrastructure Index ETN (NYSE: MLPI) and Credit Suisse has the new Cushing 30 MLP Index (NYSE: MLPN).  Morningstar just gave a run-down of each of these ETN products to show the pros and cons.

In the arena of more broadly diversified MLP investing, you can go to the closed-end funds such as Kayne Anderson MLP Investment Company (NYSE: KYN) and the Kayne Anderson Energy Total Return Fund (NYSE: KYE).  With these, there is the notion of a premium or discount to Net Asset Value.  Of the two, the first (KYN) offers more liquidity, a higher market cap, and offers a higher implied dividend yield.

Morningstar does not address the Kayne Anderson vehicles because these are closed-end funds rather than ETF or ETN products.  Here are some of the implied price ranges of the last 52-weeks for you to see a comparison:

  • JPMorgan Alerian MLP Index ETN (AMJ) $30.13; 52-Week Range: $21.04 to $31.98
  • Credit Suisse Cushing 30 MLP Index ETN (MLPN) $19.31; 52-Week Range: $17.41 to $22.87
  • UBS E-TRACS Alerian MLP Infrastructure ETN (MLPI) $25.50; 52-Week Range: $22.30 to $27.50
  • Kayne Anderson MLP Investment Company (KYN) $25.50; 52-Week Range: $18.11 to $27.54
  • Kayne Anderson Energy Total Return Fund (KYE) $23.77; 52-Week Range: $15.45 to $26.39

There are some serious concerns in each of these that need to be considered once these become ETN products.  For a full breakdown of the ETN strengths and weaknesses and a relative comparison of each, you can read the Morningstar article.


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