Income-seeking investors have few suitable places to put their money these days. Sure, there are dividend stocks and bonds, but with markets rising, yields remain punishingly low. There’s been talk of Fed tapering off its long-held policy of historically low interest rates and aggressive bond buying, but interest rates won’t skyrocket overnight.
All of this means that investors need to find new places to produce yield. One corner of the market that can satisfy an investor’s need for income are Master Limited Partnerships, which often operate in natural resources such as oil and gas and enjoy a favorable tax treatment in exchange for paying the vast majority of their profits to unit holders as distributions.
While you’ve likely read about MLPs before, you may not have heard of all of the market’s MLPs. These few in particular have small market capitalization and don’t operate in the oil and gas industries that many investors are accustomed to.
Under the radar MLPs to consider
Investors should take notice that unlike most MLPs, Terra Nitrogen’s distribution can be more volatile than some would likely prefer. Using Yahoo! Finance data, Terra Nitrogen Company, L.P. (NYSE:TNH) paid $16.86 per unit in 2012 and has paid $8.31 per unit to begin 2013. However, the company paid just $5.01 in 2010. Investors need to understand that Terra Nitrogen Company, L.P. (NYSE:TNH) operates in an industry that can be unstable, and as a result, the company’s distribution levels are subject to fluctuate.
Investors may be tempted to overlook StoneMor Partners L.P. (NYSE:STON), because it holds a market value of just $540 million. However, that would be a mistake. StoneMor Partners L.P. (NYSE:STON) generously rewards its investors with a huge distribution. The company’s current annualized distribution amounts to a 9.3% yield at recent prices. The company’s payout isn’t standing still, either; StoneMor Partners L.P. (NYSE:STON) recently raised its quarterly distribution, and has actually raised it twice over the course of the last four quarterly payments.
Last but not least, Icahn Enterprises LP (NASDAQ:IEP) is the investing vehicle of legendary money manager Carl Icahn. With this company, you’re essentially making a bet on the investing prowess of Icahn Enterprises LP (NASDAQ:IEP) and his team.
Carl Icahn himself owns roughly 99 million of the nearly 110 million outstanding units, and Icahn Enterprises LP (NASDAQ:IEP) recently gave its unit holders a 20% distribution increase on top of its already-generous yield.
Icahn Enterprises LP (NASDAQ:IEP) now pays $5 per unit, amounting to a nearly 7% yield at recent prices.
The Foolish bottom line
The hunt for yield is a difficult pursuit these days as markets keep rallying and, at least for now, the Federal Reserve continues to aggressively keep interest rates low in an attempt to juice the economy.
As a result of extremely low interest rates, certain groups of investors, particularly those in or nearing retirement, are struggling to produce income to keep up with the perpetually-rising cost of living. These MLPs are highly profitable, well-run businesses, that can produce high income to help pay for life’s expenses.
Robert Ciura has no position in any stocks mentioned. The Motley Fool recommends StoneMor Partners. The Motley Fool owns shares of StoneMor Partners. Robert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article These Under the Radar MLPs May Be Hidden Gems originally appeared on Fool.com is written by Robert Ciura.
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