Master Limited Partnerships are a good place to park an investment according to the author. Yields are upwards of 7%. There is a return of capital. Annualized growth can be as high as 9% on average. The MLPs have 1/3 of the volatility of the S & P 500. The MLPs were down but not catastrophically like the S & P in the market crash of '08. The reason may be that energy has an inelastic demand. Our energy needs are slated to grow by 1% per year for the next several decades. MLPs like the pipeline business are guaranteed profits. (Virtually) MLPs are also recession proof substantially. In addition, the MLPs will be adaptive to the green power movement.  As limited partners, investors are responsible up to their investment of capital only (UCC). 

Examples of top oil shale investments are New Shale NF Basins, Barnett Shale Tx., Marcellus Shale Pa. and Rockies CO. , Wy. and Utah. MLPs are 90 % owned by individuals.  In effect, the MLP refunds your investment in five years or so and the remainder consists of dividends for life. 

The MLP Index consists of Alerian MLP, Cushing 30, Tortoise and others. The author explains the reporting requirements for MLPs on the K-1 form and a small portion of Schedule E (about 5% form utilization).  Investors cannot net MLP profits to losses in other MLP investments.  Instead, individual MLP losses may be carried forward.  Form 4797 is utilized for selling the units which would not be advised if the objective is a life-long income. 

The author advises us to record the MLP cost basis and retain the worksheet. The best MLPs are Kinder Morgan (KMR) and Elbridge Energy Partners (EEQ) according to the book.  Closed end MLPs utilize leverage to increase returns.  The book also recommends that investors receive and shelter the cash flow from the MLP in a taxable account. 

Examples of Tooth Booth MLPs are APL, BWP, BPL, ETP, OKs (Natural Gas partners),WES, BGH, DPM, DEP, EROC and EEP.  If the purchase is made via the brokerage account, no K-1 form filing may be required. Samples of exploration and production MLPs are BBEP and DMLP (Bakken).  POPE is a timber MLP on the Nasdaq. I'm inclined toward investment in the timber MLP coming out of a recession and into home building and buying.  Overall, the acquisition would be perfect for your personal investment library. 

Pipeline MLPs: 
Here is a list of some major pipeline MLPs with stock ticker: 

Amerigas APU 
Atlas Pipeline Partners APL 
Crosstex Energy XTEX 
Dorchester Minerals DMLP 
Enery Transfer Partners ETP 
Enterprise Products Partners EPD 
Ferrellgas Partners FGP 
Genesis Energy GEL 
Gulfterra Energy Partners GTM 
Holly Energy Partners HEP 
Inergy NRGY 
K-Sea Transportation KSP 
Kaneb Pipe Line KPP 
Kinder Morgan Energy Part. KMP 
Magellan Midstream MMP 
MarkWest Energy MWE 
Martin Midstream MMLP 
Northern Borders NBP 
Pacific Energy PPX 
Plains All Pipeline PAA 
Star Gas SGU 
Suburban Propane SPH 
Sunoco Logistics SXL 
TC Pipelines TCLP 
TEPPCO Partners TPP 
Valero VLI 

Natural Resource MLPs : 

Alliance Resource Partners ARLP (coal) 
Crown Pacific CRPP.OB (timber) 
Natural Resource Partners NRP (coal) 
Penn Virginia Resource Partnership PVR (coal, timber) 
Pope Resources POPEZ (timber) 
Terra Nitrogen TNH (fertilizer) 


Real Estate MLPs :
America First RE Investments AFREZ 
American Real Estate Partners ACP 
Heartland Partners HTL 
Interstate General IGC 
New England Realty NEN 

Most MLPs pay a hefty dividend of 4-8% (distribution).  These are good income stocks. The pipeline companies have more stable businesses generally unaffected by the underlying price of the gas or oil. According to Master Limited Partnerships by Richard Stooker (Gold Egg Investing),the best MLPs are Kinder Morgan (KMR) and Elbridge Energy Partners (EEQ). 

Kinder Morgan (KMP) has had a terrific run-up from its $8 or so opening in 1997 to nearly $67 today. That's over 8 times your original investment plus a mound of dividends.  Let's assume you bought KMP at the end of July 2005 for $52.50. In the 5 or so years since, there was a payout of over $18.40 per share of stock, averaging 92 cents per quarter for the past 20 quarters. Roughly 35% of the cost of KMP will have been returned in addition to a $14. per share increase in price from $52.50 to the current $67. over the past 5 years. 

The computed returns are 6% in 2006, 6.4% in 2007 and over 7% thereafter. The pre-2008 crash dividend was 99 cents per quarter and the post crash dividend actually increased to $1.07 per quarter by April of this year. This MLP has climbed steadily at about a 40 degree angle from $8 to the current $67 per share. Draw a straight line through the peaks and you will see that the trajectory is upward substantially with the peak price getting higher and higher.  There are some intermittent valleys but the trend is upward virtually throughout the past 13 years. 

KMP transports refined petroleum products through more than 37, 000 miles of pipelines. They transport CO 2 through their top divisions. KMP owns 180 bulk terminals as well as railroad transloading facilities. Approximately 90 million tons of coal, petroleum, coke and bulk products are transported each year. A key attraction is that KMP is an owner of important factors of production in its ongoing operations.  In addition, the company offers quick and efficient solutions to move Marcellus NGLs (natural gas) to market. 

Despite this seemingly stellar performance, there is not unanimity among analysts at this time advising to buy KMP. The global economy must shake off doldrums in the Euro, Greek debt, and uneasiness over derivatives in some quarters and a real estate market in varying stages of a recovery in the USA.  In addition, increments in the employment outlook would solidify some of the recent traction in industrial gains. 

On the positive side, KMP generated enough cash to pay investors $4.20 per unit and have $14 million excess coverage.  According to the company website, the 2009 headwinds were due to lower refined product transportation volumes, less steel handling at bulk terminals, lower crude oil prices and a difficult business environment for Texas Intrastate Pipelines. 

The company claims to have transcended these challenges due to exceeding expectations on other assets, lower costs internally, lower interest rates, a strong balance sheet, good cash flow and excellent access to capital markets. 

The report of the 10K for the year 2009 was received on 2-23-2010 according to the Edgar records of the Securities and Exchange Commission. The KMP management cited routine constraining factors in doing business. Some of the major constraints cited were: 

* rulemaking, oversight and rate challenges in the industry 
* cost overruns, delays in project completions and tightened capital markets 
* risks of energy commodity transportation, unexpected geological formations/pressures 
* equipment failures, accidents, fires, shortages 
* foreign supply and demand for oil and natural gas, OPEC 
* market volatility and hedging arrangements 
* downturns in credit markets can lead to increased costs of borrowing 
* pipelines in some areas may be subject to natural disasters like hurricanes 
* Federal Energy Regulatory Commission proceedings, carbon dioxide litigation and other litigation 

I don't make investment recommendations. Nonetheless, KMP would appear to be a better bargain in the mid to upper $50s/ share thereby increasing the yield to nearly 7.5%. At $67/share, the acquisition could be pricey; however, I would keep KMP on the investment radar screen and perform the due diligence requisite to purchasing the stock at the appropriate time. 

This book is excellent.  It is well worth the price paid.  The presentation is very easy to understand.  The book contains considerable in depth analyses on a plethora of investment products. As such, a copy of the book should be in every financial library.