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MLP Portfolio Outperforms S&P 500

Master Limited Partnerships (MLPs) are similar to Real Estate Investment Trusts (REITs) in that they do not pay any income taxes. MLPs provide investors with attractive yields due to their special tax treatment. By law MLPs pay their profits directly to their shareholders. MLPs pay much bigger dividends than other dividend paying stocks because they pay no tax.

Due to their favorable tax treatment MLPs are ideal for the small investor. There are dozens of MLPs that have been delivering dependable returns to investors for many years.

In this video learn how a portfolio of MLPs produced an average return of 1,232% versus 9% for S&P 500 Index over the past ten years.


MLP Dividend Growth Produces 74% Annual Yield

Kinder Morgan LP is an example of a MLP that has rewarded its investors with an incredible flow of income. Kinder Morgan owns and manages oil and gas pipelines and storage facilities. Kinder Morgan is what is known as a 'midstream' pipeline company that profits from the stable flow of energy not from the price of crude oil. KMP is merely a 'toll road' company that transports energy which is a very stable business.

Although the energy toll road business is very dependable, Kinder Morgan LP has been able to consistently raise its annual distributions (dividends). The graph below displays the total distributions paid out for a $25,000 investment in Kinder Morgan LP 15 years ago. Kinder Morgan has paid out an incredible $169,925 in cash distributions on a $25,000 investment.

The increase in distributions would result in current annual distributions of $18,612 for a $25,000 investment. $18,612 in cash distributions on a $25,000 investment translates to a 74% annual yield. Imagine receiving a 74% annual yield from company in such a stable industry. Keep in mind that this 74% annual yield does not include stock price appreciation and is strictly a 'cash on cash' return. Also, the $169,925 in cash distributions would be considerably higher if quarterly distributions were reinvested in additional shares of stock which would allow for compounding of returns.

Futures trading involves high risks with the potential for substantial losses. Hypothetical performance results have many inherent limitations, some of which are described as follows. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. there are numerous other factors related to the markets related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results. Option and stock investing involves risk and is not suitable for all investors. Only invest money you can afford to lose in stocks and options. Past performance does not guarantee future results. The Chuck Hughes Inner Circle Advisory trade record does not represent actual investment results. Trade examples are simulated and have certain limitations. Simulated results do not represent actual trading. Since the trades have not been executed, the results may have under or over compensated for the impact, if any, of certain market factors such as lack of liquidity. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown.