Also in this playlist...
This transcript is automatically generated
One of the hottest bats of the past year have been these master limited partnerships that combined.
The tax benefits of a limited partnership with the liquidity of publicly traded stocks are usually energy stocks and they've had a great run up our next -- MM LP funds have had total returns between twenty -- 30% the past twelve months.
And while some may find right now that MLPs are overvalued he has recently launched two new MLP ETA has one of which has a definitive.
Eight and a half percent joining us now is they're ensuring got.
York bill capital management founder and I bet you're gonna chastise me they're not dividends they're called what they're called it -- -- options right young adults.
-- whole different lingo for MLPs but.
Basically go through what they are how they differ from a stock for our audience doesn't know very much there's other similar number one it.
Is they are publicly traded on on major strings like the New York Stock Exchange.
There any reason their partnerships is because -- partnerships for tax purposes which means.
They don't pay -- 35% corporate income tax rate.
So income like your partner your partner in the in the income passes through like -- -- said -- -- cost of capital advantage because at least 35% my cash flow.
As a manager of very -- so -- to me and we see that in the form.
Increased dividends is investors not partners essentially when you sell them you have to you have to take big gain as income right not as capital gains is -- -- the Fed tax -- that's -- so but if you jump ahead that far remember that.
Roughly 80% of the income you receive year after year is tax deferred means you get a tax free loan from the US government as long as you on the partnership and then there's a day of -- upon sale.
But the main thing that appeals to the folks out there he's revealed -- -- turn out these incredible yields whether you call dividends or distributions it doesn't matter if you look at these returns.
Why aren't -- in so many people have gotten into -- those you'll chasing individuals out there sure why are they not overvalued state that case.
Okay have silly show I -- -- say to investors today because if you look at it -- returns historically to have outperformed the S&P RR flex -- strategy 10% per random.
For over twelve years have tremendous up reforms -- -- overvalued they're not.
The pass through vehicle so what are you getting to -- when you -- if you fire fund why -- -- and a half percent current income.
That income grew that's the -- bill high income it's a little riskier than others -- well it would seem to be that way and in half percent -- almost lead you to believe it.
But distributions on how to present the company's maintained -- -- their distributions in the first quarter distribution growth is just a little shy of 10%.
So we see stability of distributions -- the real question is why.
With this tremendous amount of income isn't income means more risk -- doesn't it can mean more risk -- come high -- -- does.
-- -- an MLPs is consistently.
Distributions being paid and growing so you don't have the Bristol wins is because of taxes.
A lot of institutional investors haven't gotten in -- -- -- is where the retails actually won they've been first.
Now you're very responsible guy a lot of people in this business are not so responsible parent has written about you said your victory that king of these things it's -- but.
Some of these MLPs they sign you on.
And then they cut the dividend do you they'd they'd pull again -- -- and then they cut that the dividend that you get have you seen that how do you try to avoid doing man that.
High quality its distributions that's the the name of the game here says an investor we've we've been looking in researching an asset class and investing in and in -- asset -- US energy infrastructure.
So look through the MLP structure what are you buying your -- pipelines.
These are transportation systems these are our roads have long term contract so.
What we're looking for -- MLPs with the highest quality distributions -- so that the greatest sin that we can do as investors is buying you know -- it's gonna cut its distribution.
And then number two we find the ones we believe of -- high probability of not cutting their distribution.
We look for what are the catalysts that are gonna -- distributions to grow over time -- We have that combination in place that's the ideal very quickly you -- have to single picks if the folks out there are ready for -- these wind energy which is a natural gas play an atlas energy why you like these stipend.
So I would have the first -- he is actually minus the ticker ally any Linn Energy is the underlying Linux forgiven as trend line is this sizable Cox stock symbol.
So Linn Energy is a do -- in expiration of production company.
It hedges its production for five years so again no commodity exposure.
Since going public in 2006 it's maintained or increased its distribution back our our story every quarter consistently.
It's delivered 7% historical growth rates it's yielding 8% currently right now we think it's -- organic -- -- -- 6%.
Potentially at -- general partner Chris distributions 24% first quarter -- think it's gonna grow 15% for the next.
Two years well according to Barron's your clients are flying high so people should listen what you say very good to see David thank you for coming -- work so capital management lists over to you.
Filter by section