“It doesn’t matter if you drive a Honda Civic or an Aston Martin, you will be charged the same down a toll road,” Feng said. “Pipeline and storage businesses charge the same price to move or store a $30 barrel as they do a $150 barrel of oil.”
For the long-term investor, MLPs provide a necessary service, and the business is on the rise. Interstate oil pipelines are federally mandated to increase by the producer price index plus 2.65% every July 1st. On the volume side, energy demand in the U.S. has increased an average 1% per annum over the past 30 years. In the U.S., about $243 billion will be invested in infrastructure over the next 25 years to expand natural gas distribution.
Additionally, the MLP Parity Act will expand the definition of “qualified” sources to include renewables, such as biomass and geothermal sources into the structure.
Exchange traded products that invest in MLPs include:
- Alerian MLP ETF (NYSEArca: AMLP): 6.10% yield
- JP Morgan Alerian MLP Index ETN (NYSEArca: AMJ): 5.02% yield
- Yorkville High Income MLP ETF (NYSEArca: YMLP): 8.44% yield
- Global X MLP ETF (NYSEArca: MLPA): 6.08% yield
For more information on master limited partnerships, visit our MLPs category.
Max Chen contributed to this article.