My personal favorite kind of income investment is the Master Limited Partnership.
It's not well-known, but the word about these special energy stocks is spreading.
Midstream Master Limited Partnerships are Tollbooth Companies
The best type are what's called "midstream." This means that they take care of crude oil, natural gas and byproducts between the source (upstream -- wells) and the end-user (downstream -- gas stations and utilities).
In between are thousands of miles of pipeline, refineries, storage facilities, gathering and other types of processing you need a degree in chemical engineering to understand.
When Will We Not Need to Transport Energy?
However, what I think we all understand is that energy use is essential to civilization as we know it. And for all the talk of alternative sources of energy, none of them are ready for prime time. Even if they were, it'll take time to convert over. And the pipelines MLP companies own can also carry methane.
So these companies will supply us with a vital service for the foreseeable future.
Utility stocks depend on these companies to give them the energy to burn to supply you and I with electricity and natural gas.
Now, because they're in the middle, they get paid simply to transport the energy. They charge what the federal government allows them to charge, no matter what the price of energy is.
They get their money whether oil is $10 per barrel or $1,000 per barrel.
Energy Use Varies, but Demand Will Continue to Grow
The only real cap on their income is that, in bad economic times such as 2009, energy use goes down.
However, this is a short term fluctuation. Sooner or later it will go up again.
Master Limited Partnerships Come With Tax Paperwork
The big problem with investing in Master Limited Partnerships is that because they are structured as publicly traded limited partnerships, their cash distributions are taxed separately, and United States taxpayers receive a K-1 form not a 1099. It's a financial advantage, but a paperwork headache.
Plus, it's not suitable to hold regular units of MLPs income investments in a retirement account.
Until recently, there were no mutual funds interested in them for various technical reasons.
Three New MLP Mutual Funds
Lately, however, Steelpath Advisors launched three mutual funds devoted to Master Limited Partnerships:
Steelpath MLP Alpha Fund
Steelpath MLP Income Fund
Steelpath MLP Select 40 Fund
They share a lot of characteristics -- expense ratios over 1%, a 0.25% 12b-1 fee, maximum sales loads over 5%, and minimum account opening balances of $3,000. Fund advisors are Stuart Cartner and Gabriel Hammond. And no redemption charges.
The Alpha Fund consists of the top twenty MLP growth prospects.
The Income Fund consists of the top Master Limited Partnerships paying the highest distributions. It pays monthly dividends.
The Select 40 Fund consists of the top forty Master Limited Partnerships.
Most of their holdings are midstream oil companies: petroleum transportation, natural gas and gathering/processing. However, they all also have a propane company. And the Select 40 includes coal and exploration and production companies as well.
Don't Pay the Frontend Load if You Can Avoid It
Unless you must go through a retirement fund custodian, I strongly advise you to buy your shares directly from Steelpath. Don't pay over 5% of your money off the top just to get into these funds.
And they are suitable for retirement accounts such as IRAs, though directly owning MLP units is not suitable for such accounts.
I'm sure this kind of income investment is going to have a lot of ups and downs in market price and even distributions over the years, but I believe that as a whole it will produce solid returns of investment income far into the future.
Author Resource:
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