In this article, we will be taking a look at 10 tax-advantaged MLPs with high dividend yields. To skip our detailed analysis of dividend investing, you can go directly to see the 5 Tax-Advantaged MLPs with High Dividend Yields.
Typical dividend stocks are already pretty useful to have on an investment portfolio for a number of reasons, such as their ability to outpace inflation and establish a passive income stream that may come in handy during your retirement. However, master limited partnership (MLP) dividend stocks may be a step ahead of even dividend stocks like Pepsico, Inc. (NASDAQ: PEP), AT&T Inc. (NYSE: T), Walmart Inc. (NYSE: WMT), and Visa Inc. (NYSE: V). This is not necessarily because MLPs are particularly financially stronger or more reliable, but rather because of three different reasons.
First, these stocks are tax-advantaged since they are taxed differently as compared to corporations, and investors in MLPs generally benefit from tax deferral on returns of capital. This means that while an investor is holding units in an MLP, they only have to pay taxes on them at the time of their sale. The second reason these stocks can be attractive investments is that they are typically high-yielding companies that far outpace the average on the market. For instance, Bloomberg and the Federal Reserve have estimated that as of 2021, the current yield of MLPs stood at 14.97%, compared to 6.04% for high-yield bonds, 3.9% for real estate investment trusts, and 1.85% for equities. Lastly, and perhaps most importantly, is the fact that corporate cash flows in MLPs are returned in bulk to investors in the companies through distributions, with MLPs distributing about 80-90% of their return of capital and 10-20% of ordinary income to investors.
According to a report by Investment Management Consultants Association, Inc., the above reasons, among a number of others, have resulted in MLP investment becoming a mainstream investing strategy rather than sticking to its previous status of alternative investment strategy. We can witness the rising popularity of MLPs in recent years by the fact that about 130 MLPs were trading on major exchanges by 2014, and the market capital of these companies was about $490 billion at the time, with around $422 billion of that amount, or 82% of it, coming from energy and natural resource MLPs in the midstream field, a trend that has prevailed to date.
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Without further ado, let’s take a look at the 10 tax-advantaged MLPs with high dividend yields.
Our Methodology
Insider Monkey tracks the data of about 873 hedge funds, and we have also used this data to pick dividend stocks that are highly popular among hedge funds today. For each stock we have mentioned its yield and the number of hedge funds holding a stake in it, ranking them from the lowest to the highest yield. Finally, we have used analysts’ ratings to determine which stocks are favorably placed in analyst and investor circles, picking stocks with mostly positive ratings and strong fundamentals.
Tax-Advantaged MLPs with High Dividend Yields
10. MPLX LP (NYSE: MPLX)
MPLX is a master limited partnership formed by Marathon Petroleum Corporation (MPC). The company has a dividend yield of over 9%.
As of the end of the second quarter, 11 hedge funds tracked by Insider Monkey held stakes in the company, compared to 8 funds a quarter earlier.
9. Cheniere Energy Partners LP (NYSEAMERICAN: CQP)
This MLP was formed by Cheniere Energy (LNG). It has a dividend yield of over 6%. A total of 2 hedge funds tracked by Insider Monkey held stakes in the company as of the end of Q2.
8. Brookfield Renewable Partners L.P. (NYSE: BEP)
Brookfield Renewable Partners L.P. (NYSE: BEP) is a renewable electricity and utilities company that owns and operates a portfolio of renewable power generating facilities. The company mainly works in North America, Colombia, Brazil, Europe, India, and China and ranks 8th on our list of the tax-advantaged MLPs with high dividend yields.
This July, JPMorgan’s Mark Strouse raised his price target on shares of Brookfield Renewable Partners L.P. (NYSE: BEP) from $43 to $46, while reiterating a Neutral rating on the stock.
In the second quarter of 2021, Brookfield Renewable Partners L.P. (NYSE: BEP) had an EPS of -$0.13, missing estimates by $0.17. The company’s revenue was $1.02 billion, up 56.53% year over year and beating estimates by $90.58 million. Brookfield Renewable Partners L.P. (NYSE: BEP) has gained 28.45% in the past year.
By the end of the second quarter of 2021, 20 hedge funds out of the 873 tracked by Insider Monkey held stakes in Brookfield Renewable Partners L.P. (NYSE: BEP) worth roughly $232 million. This is compared to 24 hedge funds in the previous quarter with a total stake value of approximately $223 million.
Like Pepsico, Inc. (NASDAQ: PEP), AT&T Inc. (NYSE: T), Walmart Inc. (NYSE: WMT), and Visa Inc. (NYSE: V), Brookfield Renewable Partners L.P. (NYSE: BEP) is a good stock to invest in.
ClearBridge Investments, an investment management firm, mentioned Brookfield Renewable Partners L.P. (NYSE: BEP) in its first-quarter 2021 investor letter. Here’s what they said:
“U.S. renewables utility Brookfield Renewable was another detractor. Brookfield Renewable is a pure-play renewables operator and developer headquartered in Canada and domiciled in the U.S., focused on international hydro, solar, wind and storage technology. As more private and public institutions announce ambitious carbon reduction initiatives, Brookfield Renewable’s globally diversified, multi-technology renewables business makes it an attractive partner. Its development pipeline stands at 18,000 megawatts, providing confidence the company can meet its targeted double-digit cash flow growth through to 2025. Shares moderated amid expectations of rising bond yields, and a cool-off on the green trade.”
7. Dorchester Minerals LP (NASDAQ: DMLP)
Dorchester Minerals is a Dallas-based firm that offers a dividend yield of over 9.43%. A total of 4 hedge funds tracked by Insider Monkey held stakes in the company as of the end of the second quarter.
6. Crossamerica Partners LP (NYSE: CAPL)
CrossAmerica is a wholesale and retail distributor of motor fuels. The Pennsylvania-based company offers a dividend yield of over 10%. As of the end of the second quarter, 2 hedge funds tracked by Insider Monkey held stakes in the company.
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Disclosure: None. 10 Tax-Advantaged MLPs with High Dividend Yields is originally published on Insider Monkey.
Correction: The previous version of this article incorrectly called Blackstone, Ares Management, Apollo Global Management and Brookfield Infrastructure MLPs. The article was amended at 5:03 PM ET on September 15
