MLP ETFs for Alternative Income, Yields Over 6% | Page 2 of 2 | ETF Trends

“Investors need to be aware that when investing in MLP ETFs, mutual funds and closed-end funds, including MLPA, the funds will be paying capital gains taxes,” Bruno del Ama said.

On the other hand, MLP exchange traded notes do not incur capital gains taxes, and they also do not require K-1s. However, ETNs are debt securities subject to the creditworthiness of the issuer. Additionally, after-tax returns may be lower on ETNs than for ETFs since ETNs payments are treated like fixed-income assets.

“So if your effective tax rate is higher than the dividend tax rate, as is typically the case, you will pay higher taxes on income distributions from an ETN versus an ETF,” Bruno del Ama said.

For qualified accounts, like 401(k)s and IRAs, investors may use MLP ETFs, whereas you can not get direct access to individual MLPs in these investment accounts.

Some MLP ETFs include:

  • ALPS Alerian MLP ETF (NYSEArca: AMLP): 6.02% yield
  • Yorkville High Income MLP ETF (NYSEArca: YMLP): 7.72% 30-day SEC yield
  • Global X MLP ETF (NYSEArca: MLPA): 6.07% 30-day SEC yield

MLP ETNs include:

  • UBS E-TRACS Alerian MLP Infrastructure Index (NYSEArca: MLPI): 4.80% yield
  • Credit Suisse Cushing 30 MLP Index (NYSEArca: MLPN): 5.42% yield
  • JP Morgan Alerian MLP Index ETN (NYSEArca: AMJ): 4.92%

For more information on master limited partnerships, visit our MLPs category.

Max Chen contributed to this article.