The 25 Highest-Yielding MLPs in March: Northern Tier Energy LP (NTI), Natural Resource Partners LP (NRP), QR Energy LP (QRE)

2. QR Energy
Second up is QR Energy LP (NYSE:QRE) with a yield of 11.2%. QR Energy is an upstream MLP which owns oil and gas fields in Texas, Louisiana, and Michigan. The partnership currently pays a quarterly distribution of $0.4875 and has production 95% hedged for 2013 and at least half of production hedged until 2016.

QR Energy LP (NYSE:QRE) is down as of late for two reasons. One, management has said that they don’t believe the quarterly distribution will be raised this year. The second issue weighing on the stock is management’s incentive structure. Without getting into tons of details, QR management was able to take an incentive distribution of 6.1 million shares in the fourth quarter for a value of roughly $100 million-$120 million, and it will be able to take sizable incentive distributions every 4th quarter as long as the MLP has paid out at least $0.4744 for the past four quarters. Investors in QR Energy LP (NYSE:QRE) should be keenly aware of management’s incentive structure and how it can affect investors. Fellow Fool Sean Williams believes QR Energy will outperform in the long run, but I’m withholding judgment for now.

3. Natural Resource Partners
Third is Natural Resource Partners LP (NYSE:NRP) with a yield of 9.95%. Natural Resource Partners owns sizable coal assets and has been diversifying into infrastructure, natural gas, and oil as coal has been beaten down in the U.S. Natural Resource Partners LP (NYSE:NRP)’ saving grace so far has been metallurgical coal, which has not seen as big a drop in price as steam coal. Still, Natural Resource Partners LP (NYSE:NRP) distributable cash flow fell 12% year over year to $246 million, putting its distribution coverage ratio right at one. Should coal prices continue to fall, or if there is a slowdown in China that affects metallurgical coal prices, Natural Resource Partners LP (NYSE:NRP) could possibly have to lower its dividend. On the other hand, should coal prices rebound, Natural Resource Partners LP (NYSE:NRP), as well as fellow coal MLP and number 25 on our list, Alliance Resource Partners, will be sitting pretty.

Foolish bottom line
Remember, their seemingly irresistible yields could be ticking time bombs, so do your own due diligence. Also, make sure you diversify your picks across various sectors. As investors relearn every decade or so, you never want to put all your eggs in one basket — no matter how tempting the dividends.

The article The 25 Highest-Yielding MLPs in March originally appeared on Fool.com and is written by Dan Dzombak.

Dan Dzombak has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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