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Master limited partnerships
Master limited partnerships © leungchopan/

Master limited partnerships

Master limited partnerships, which trade like stocks, mostly consist of firms that own oil and gas storage or transportation facilities, particularly pipelines.

"The build-out of the U.S. energy infrastructure will continue, regardless of what happens with the price of oil," says Tim Ghriskey, chief investment officer at Solaris Asset Management in New York City.

Owning shares of an MLP that has pipelines is like investing in a toll collector, he says. The pipeline owners negotiate long-term contracts to transport oil and gas. "It's the primary and lowest-cost transportation," Ghriskey says.

Some blue chip MLPs sport yields of more than 7 percent, compared with the 10-year Treasury yield of 2.34 percent. And dividend payouts continue to grow, Ghriskey says. There's also a tax advantage. The payouts are technically return of capital rather than dividends, so they aren't taxed, but are subtracted from your cost basis instead. But be aware that you have to file a complicated K-1 tax form every year.

New power plants are being built to run on natural gas, especially in the Southeast, Ghriskey says. And ultimately, the government will allow widespread exports of oil and gas, he says.


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