Master Limited Partnership ETFs Are Back on Trend

Both MLP ETFs and ETN investors are issued a 1099 form instead of the traditional K-1s associated with MLP stocks during tax season. MLP ETFs and ETNs can also be used in individual retirement accounts without negative consequences, whereas MLP units held in an IRA may be required to pay distributions from unrelated business taxable income in the year it is realized.

Other high-yield MLP ETF options include the Market Vectors High Income MLP ETF (NYSEArca: YMLP). This ETF tracks the Solactive High Income MLP Index, which emphasis high yield MLPs. YMLP shows a robust 28.4% 12-month yield.

The Direxion Zacks MLP High Income Shares (NYSEArca: ZMLP) follows the Zacks MLP Index, which selects MLPs based on liquidity, short interest, dividend yield and other factors and is sorted from highest to lowest. Only 25 components are selected and are equally weighted. ZMLP also shows a 14.07% 12-month yield.

Investors can also go with the ETN route through something like the UBS ETRACS Alerian MLP Infrastructure Index ETN (NYSEArca: MLPI), which tracks the Alerian MLP Infrastructure Index. MLPI has a 8.05% 12-month yield.

Additionally, the Credit Suisse X-Links Cushing MLP Infrastructure ETN (NYSEArca: MLPN) tries to reflect the performance of the Cushing 30 MLP Index. MLPN has a 9.48% 12-month yield.

Alternatively, investors who want to stick with ETFs but are wary of the C-corporation structure can consider hybrid MLP ETFs, or non-C-corporation MLP ETFs, which have reduced direct MLP holdings to under 25% to meet regulatory rules and hold other energy infrastructure stock through subsidiaries as a way to avoid the double-taxation issue. These hybrid options include the Global X MLP & Energy Infrastructure ETF (NYSEArca: MLPX), Alerian Energy Infrastructure ETF (NYSEArca: ENFR) and actively managed First Trust North American Energy Infrastructure Fund (NYSEArca: EMLP). These types of hybrid energy infrastructure ETFs help investors capture some of the high yields from MLPs but limits the tax hit from solely owning MLPs.

For example, the Global X MLP & Energy Infrastructure ETF includes a 24.3% tilt toward limited partnerships, along with 58.4% in MLP affiliates and 17.4% in energy infrastructure corporations. Investors will still find familiar names among its top holdings, including Enbridge (NYSE: ENB) 8.7%, Kinder Morgan (NYSE: KMI) 8.0% and Transcanada (NYSE: TRP) 7.6%. MLPX has a 5.20% 12-month yield.

The Alerian Energy Infrastructure ETF includes 24.3% U.S. MLPs, along with 32.9% U.S. energy infrastructure, 24.6% Canadian energy infrastructure and 18.2% U.S. general partners. ENFR is slightly less top heavy, with 6.1% in ONEOK (NYSE: OKE), 5.9% in Columbia Pipeline (NYSE: CPGX) and 5.1% in The Williams Cos (NYSE: WMB). The fund shows a 3.58% 12-month yield.

Lastly, the First Trust North American Energy Infrastructure Fund, an actively managed ETF, includes pipelines 53.3%, electric power 35.8%, natural gas utility 4.7%, propane 4.0% and coal 1.7%. The fund also includes ENB 7.3%, TRP 6.7% and KMI 4.7% among its top holdings. EMLP has a 4.29% 12-month yield.