Kinder Morgan Energy Partners LP (KMP), Linn Energy LLC (LINE): Attractive MLPs Are Everywhere

First, should the economy prove to be strong enough for the Fed to take its foot off the monetary pedal, a stronger economy would certainly involve greater demand for the natural resources transported by America’s best MLPs. That means higher profits for unit holders, and assuming you bought at opportune prices (like now), higher stock prices.

Second, higher profits mean higher distributions for these MLPs, another key difference between stocks and bonds. Bonds are contractual relationships that carry a fixed coupon throughout the life of the bond (hence the term fixed income). MLPs, such as Linn Energy LLC (NASDAQ:LINE) and Kinder Morgan, on the other hand, raise their distributions over time as their profits grow.

To that end, Kinder Morgan Energy Partners LP (NYSE:KMP) has raised its distribution steadily for many years, with its most recent quarterly payout being 8% higher than the same payout last year. Going back further, Kinder Morgan has raised its distribution by 6.25% compounded annually over the past five years.

Linn Energy LLC (NASDAQ:LINE), meanwhile, announced it would up its distribution from $2.90 to $3.08 later this year, on both Linn Energy and LinnCo, amounting to a 6.2% increase from the previous distribution. Moreover, the company also announced its intention to pay its distribution monthly instead of quarterly, meaning investors can compound their wealth even faster.

Linn and Kinder Morgan: The definition of slow-and-steady wealth creation

I’ve initiated a position in LinnCo LLC (NASDAQ:LNCO) and would eagerly buy more should the opportunity arise. I’ll gladly lower my cost basis and secure an even higher yield should the often-irrational Mr. Market decide it would rather put its money in cash yielding 1% than LinnCo at 8%.

Same for Kinder Morgan Energy Partners LP (NYSE:KMP): while I do not have a position yet, I’m strongly considering allocating spare capital to what represents one of the best-run MLPs in existence.

As a result, I view the recent downturns among these oil and gas MLPs not as threats, but as welcome buying opportunities.

The article Attractive MLPs Are Everywhere originally appeared on Fool.com and is written by Robert Ciura.

Robert Ciura owns shares of Linn Co, LLC . The Motley Fool has no position in any of the stocks mentioned. Robert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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