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The Best Play on the Shrinking MLP Universe

Investors Alley
The Best Play on the Shrinking MLP Universe
The DCP Midstream (DCP) buyout offer earlier this month marked another master limited partnership…

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Investors Alley
The Best Play on the Shrinking MLP Universe

The DCP Midstream (DCP) buyout offer earlier this month marked another master limited partnership (MLP) coming off the board. Over the last eight years, the number of publicly traded midstream MLPs declined by 74%.

Here’s what that means for investors, especially those who like the tax-advantaged, high-yield income from MLPs…

On August 18, Phillips 66 (PSX) announced an offer to buy all of the publicly traded units of DCP for $34.75 per share. The DCP general partner interests are controlled by PSX and Enbridge, Inc. (ENB), so this deal will be done without an investor vote.

From the 1980s until the 2014-2016 energy sector crash, the MLP business structure dominated energy midstream services (pipeline, storage, and terminals). Sponsor companies like Phillips 66 owned the general partner interests, and investors like us owned limited partner units. MLP investors earned tax-advantaged and usually nicely growing distributions. General partners saw the cash flow from their ownership stake grow even faster.

Starting in late 2014, and over the next year, the price of crude oil went from more than $100 per barrel to less than $30. The MLP business model of funding growth through new debt and equity stopped working. By early 2016, the Alerian MLP index had lost 62% of its value; it has not recovered.

During the dark age of energy midstream, MLP sponsors/GPs started to roll up the limited partnerships, absorbing them into their corporate entities. For example, Kinder Morgan (KMI), which operated as the general partner, bought in Kinder Morgan Energy Partners LP. These transactions in the MLP space happened again and again. The number of midstream MLPs went from 76 in October 2014 to a current 20.

The good news is that the surviving MLPs are financially stable and pay attractive yields. Plus, most are growing distributions. The MLP structure means that income earned by investors is a non-taxable return of capital. Taxes get handled at tax time from the Schedule K-1s sent to investors. In most cases, an MLP investment will generate non-taxable income for many years.

Here are the seven MLPs with market caps over $5.0 billion. I include the current yield and year-over-year distribution growth:

  • Enterprise Products Partners LP (EPD)
    • Market cap: $58.2 billion
    • Current yield: 6.95%
    • Dividend growth: 3.3%
  • Energy Transfer LP (ET)
    • Market cap: $36.5 billion
    • Current yield: 6.4%
    • Dividend growth: 24.2%
  • MPLX LP (MPLX)
    • Market cap: $32.9 billion
    • Current yield: 8.7%
    • Dividend growth: 2.6%
  • Cheniere Energy Partners LP (CQP)
    • Market cap: $25.7 billion
    • Current yield: 5.6%
    • Dividend growth: 32.7%
  • Magellan Midstream Partners LP (MMP)
    • Market cap: $10.7 billion
    • Current yield: 8.1%
    • Dividend growth: 1.0%
  • Western Midstream Partners LP (WES)
    • Market cap: $10.7 billion
    • Current yield: 5.9%
    • Dividend growth: 31.4%
  • Plains All American Pipeline LP (PAA)
    • Market cap: $8.1 billion
    • Current yield: 6.8%
    • Dividend growth: 21%.

Some of the big dividend increases are due to companies staying conservative through the pandemic and now catching up with where distributions should be. The low dividend growth MLPs haven’t yet restarted growing payouts coming out of the pandemic.

Due to potentially adverse tax issues, midstream MLPs should not be owned in qualified retirement accounts, such as IRAs. The InfraCap MLP ETF (AMZA) provides balanced investment exposure to the listed MLPs without the tax issues. AMZA sends out Forms 1099 at tax time, but the ETF income pass through the MLP tax advantages on that income. AMZA currently yields 8.25%.That’s just one of the low-risk, high-income stocks I recommend to my Dividend Hunter members after personally vetting them. To see what else is on my list, and how I’m making double-digit income every year, join today – click here.

Everyday places to find 38.5% dividend yields in this market

  • Did you know you could collect 38.5% dividend yields whenever one of the 9,863 new mortgages gets signed today?
  • What about banking 12.9% returns whenever one of the 11 million people today fills up their tank with all the expensive gasoline?
  • Or, pocketing an incredible 25.9% yield from Americans spending $642 billion in entertainment each year whether skiing, going to the movies, or spoiling your spouse at a resort.
I’m about to show you a dozen or so amazing, but ordinary places where 38.5% income is hiding.

It’s hiding in plain sight and you could be enjoying these dividend payouts starting today.

Click here to get started.

The Best Play on the Shrinking MLP Universe
Tim Plaehn

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Global Wages Take A Hit As Inflation Eats Into Paychecks

Global Wages Take A Hit As Inflation Eats Into Paychecks

The global inflation crisis paired with lackluster economic growth and an outlook…

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Global Wages Take A Hit As Inflation Eats Into Paychecks

The global inflation crisis paired with lackluster economic growth and an outlook clouded by uncertainties have led to a decline in real wages around the world, a new report published by the International Labour Organization (ILO) has found.

As Statista's Felix Richter reports, according to the 2022-23 Global Wage Report, global real monthly wages fell 0.9 percent this year on average, marking the first decline in real earnings at a global scale in the 21st century.

You will find more infographics at Statista

The multiple global crises we are facing have led to a decline in real wages.

"It has placed tens of millions of workers in a dire situation as they face increasing uncertainties,” ILO Director-General Gilbert F. Houngbo said in a statement, adding that “income inequality and poverty will rise if the purchasing power of the lowest paid is not maintained.”

While inflation rose faster in high-income countries, leading to above-average real wage declines in North America (minus 3.2 percent) and the European Union (minus 2.4 percent), the ILO finds that low-income earners are disproportionately affected by rising inflation. As lower-wage earners spend a larger share of their disposable income on essential goods and services, which generally see greater price increases than non-essential items, those who can least afford it suffer the biggest cost-of-living impact of rising prices.

“We must place particular attention to workers at the middle and lower end of the pay scale,” Rosalia Vazquez-Alvarez, one of the report’s authors said.

“Fighting against the deterioration of real wages can help maintain economic growth, which in turn can help to recover the employment levels observed before the pandemic. This can be an effective way to lessen the probability or depth of recessions in all countries and regions,” she said.

Tyler Durden Mon, 12/05/2022 - 20:00

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Metaverse comes in second place as Oxford’s word of the year

The term describing an internet-enabled virtual world lost to "goblin mode" in 2022 — "a type of behavior which is unapologetically self-indulgent, lazy,…

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The term describing an internet-enabled virtual world lost to "goblin mode" in 2022 — "a type of behavior which is unapologetically self-indulgent, lazy, slovenly, or greedy."

“Metaverse” has come in second to “goblin mode” as the Oxford University Press’ 2022 word of the year after the process was opened up to voters for the first time ever.

In a Dec. 4 announcement, Oxford Languages said the viral term “goblin mode” beat out “metaverse” and #IStandWith to become its 2022 word of the year. According to Oxford’s research, usage of the term metaverse “increased almost fourfold from the previous year in the Oxford Corpus,” driven in part by Facebook’s rebranding to Meta in October 2021.

Metaverse lost to goblin mode, which went viral in February, as it seemingly “captured the prevailing mood of individuals who rejected the idea of returning to ‘normal life’” following COVID-19 lockdowns being lifted in many areas. #IStandWith took third place in the contest, driven by social media hashtags including #IStandWithUkraine following Russia’s invasion of the country in February.

“As we grapple with relatively new concepts like hybrid working in the virtual reality space, metaverse is particularly pertinent to debates about the ethics and feasibility of an entirely online future," said Oxford Languages. "A worthy opponent to ‘goblin mode’, ‘metaverse’ gained voting traction with crypto communities and publications. We see the term continue to grow in use as more voices join the debate about the sustainability and viability of its future."

In the video pitch for ‘metaverse’ released in November, Oxford said the term dated back to “the science fiction novel Snow Crash by Neil Stephenson,” released in 1992.

More than 300,000 people cast votes between the three terms shortlisted by Oxford Languages.

Related: The metaverse is happening without Meta's permission

“NFT,” or nonfungible token, won Collins Dictionary’s contest for the word of 2021, while “vax” took first place as Oxford’s chosen word that the same year. The latest results seemingly represent a change in social media fervor around the crypto-related terms, which was reportedly falling in the first quarter of 2022.

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United Airlines stock has a 50% upside from here: Morgan Stanley

United Airlines Holdings Inc (NASDAQ: UAL) is keeping in the green on Monday in an otherwise down market after a Morgan Stanley analyst said 2023 could…

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United Airlines Holdings Inc (NASDAQ: UAL) is keeping in the green on Monday in an otherwise down market after a Morgan Stanley analyst said 2023 could be a “goldilocks” year for the air carrier.

United Airlines stock has upside to $67

Ravi Shanker sees upside in the airline holding company to $67 that translates to a near 50% premium on its current stock price.

He upgraded United Airlines stock to “overweight” this morning because he’s convinced that international travel will recover swiftly in 2023.

Earnings recovery post pandemic has kept pace with, if not led, peers and messaging has been very confident. We expect more normalised, just right conditions in 2023, stabilizing at level more favourable to earnings that market is pricing in.

Shanker expects continued leisure demand next year while business travel, he wrote, could exceed levels last seen before the COVID pandemic.

UAL has outperformed peers year-to-date

According to the Morgan Stanley analyst, prices will ease in 2023 as capacity returns. CASMxF trajectory was among other reasons cited for the bullish call.

United Airlines stock is roughly flat for the year at writing versus other major airline stocks in the red. Still, Shanker continues to see its current valuation as attractive. His note reads:

United Airlines Holdings Inc seems on track to exceed its 2023 guidance and to hit its 2026 guide issued eighteen months ago – something even the biggest UAL bulls may have considered difficult at the time.

In October, the Chicago-headquartered air carrier reported its financial results for the third quarter that handily topped Street estimates.

The post United Airlines stock has a 50% upside from here: Morgan Stanley appeared first on Invezz.

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