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Yorkville Capital Managing Director Darren Schuringa on the benefits of Master Limited Partnerships for investors.
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Traders have been flocking to -- Dividend stocks for about about a year but suddenly it they're coming out of them.
They are running away from them this week is -- -- builds about the tax treatment for dividends next year we're expecting a reset if we hit the fiscal -- Higher taxes on dividends take a look at these figures.
The 25 highest yielding stocks in the S&P 500 -- down an average of three point 8% just through Thursday's close.
Compare that with the decline of only two point 6%.
For the S&P 500 yet people went -- in the dividends but we have somebody who says there's one dividend paying structure.
That will pay you pick despite the 2013 proposed higher tax rates joining us now they're ensuring that he is -- -- capital managing partner here to talk about.
Ever met Al -- everybody -- -- this down -- master limited partnerships.
Which first explain to our viewers what they are and why they are held to a different standard even if the tax rate goes up.
Okay master limited partnerships were created by an act of congress in 1986 and in what they were designed to do is encourage.
Private investment in the US is energy infrastructure so they created a pass through vehicle.
Similar to a REIT structure so the master limited partnership.
Excuse me does not pay taxes at a corporate level but passes through distributions in them in the form of a -- dividends to the ultimate investors in the part.
Ship so if if we have a -- okay -- -- problem.
The levelled up or at what is 25% for dividends 15% -- 15% for dividends and then it resets to 39 point 6%.
Then what is going to be taxed for my dividend and on XM LP for example okay.
It that she stepped back -- the risk to a dividend income of it.
If you have a thousand dollars of dividend income.
And it goes from 15% tax rate to 39 point 6% tax rate.
You've lost 30% of your after tax income exactly so now for -- -- 80% of your income is tax deferred.
You don't pay any taxes on the income you receive 80% of the income -- even any given year.
That means he knew without getting into numbers.
Basically the -- thousand dollars on an NOP you're gonna net 920 dollars.
Of that vs 600 dollars -- again let's just explain tax deferred until you sell into -- sell and there's a recapture on the the income you received overtime and -- a little.
Offset from net operating losses what are some of your favorite MLPs and most of -- we should explain our gas pipelines energy correct correct.
80% of the in the so very little exposure to commodity prices in -- that the big driving force behind MLPs.
He's unconventional shale plays are our conventional -- place so there's -- estimated 300 billion dollars doubling the size they asset class right now in infrastructure so.
-- -- look at some of the top picks in in in in the space one of them.
Is a fun that we recently launch in New York -- behind the memo.
He yields over 8% currently for investors and we expect was eighty at about 8% a 100% of it.
Will be treated as return of capital would know recapture so you will not eat any tax on -- this year.
No we ever have to pay.
Taxable but that's definitely something that's attractive you've got legacy reserves which is another one of the third is energy with and -- Tell me what you -- about these particular names the book value place and and so both of them energy.
Is a it was transformed itself it was appropriate -- -- -- -- the general partner.
Of a pipeline which again gives you secure distribution growth over time -- -- 6%.
Its peer group that general partners on median -- yielding 4%.
-- -- a faster growth profiles so will we believe as you get multiple expansion which we'll bring the yield down.
As low as 829% distribution growth and this is -- growth.
These are not earnings -- he -- true Castro had again important to -- they're not as subject and not as exposed to fluctuation in oil prices natural gas prices correct yes and if you do you think -- -- -- -- pay you either use the the capacity that you have.
We pay for -- so it's it's it's not subject to the B spot price of commodities.
Right -- don't throw the baby out with the bath water Carol scared of what's gonna happen with the dividend taxes Daryn it's good to see you thank you for talking about master limited partnerships as you think you've -- there ensuring -- York -- --
