7/16/13: Growth in the Pipeline

We’re raising the buy below target on recent portfolio addition Energy Transfer Equity (NYSE: ETE)  to $69 in recognition of the rapid distribution growth it should achieve after 2015 as waivers on incentive distribution rights expire. As the general partner of two other MLPs, one of which manages yet another partnership, ETE is in position to capture a growing proportion of the income growth at its subsidiaries. For more information, see the July 16 edition of MLP Investing Insider.

Stock Talk

William Pitney

William Pitney

Igor –
Would you please give us your opinion on which three General Partners will be in the strongest position 2-3 years from now.
– Bill

TC Investments

Andrew Trautmann

ETE, KMI ,NSH, EEQ are rated buys , which is best in class ?

Gayle Koch

Gayle Koch

Please can you let me know which MLP’s offer discounted share purchase prices for DRIP investors.

Igor Greenwald

Igor Greenwald

I apologize for missing this question when it was submitted. Of the MLPs we recommend, both EPD (http://phx.corporate-ir.net/phoenix.zhtml?c=80547&p=irol-drip) and ETP (http://ir.energytransfer.com/phoenix.zhtml?c=106094&p=irol-drip) offer a DRIP at a 5% discount. KMR does not offer a discount but does function like a DRIP for KMP. You may be able to arrange direct reinvestment for other MLPs through your broker.

Fal De Saint Phalle

Fal De Saint Phalle

I just noticed that your recommendation for KYE has changed to sell. Somehow, I do not recall an alert for such a dramatic change in your opinion. Could you refer me to the alert, or your explanation for this change?
Thanks
Fal

Igor Greenwald

Igor Greenwald

KYE was dropped last month with the following explanation in the portfolio update (http://www.investingdaily.com/mlp-profits/articles/18069/dont-let-the-dog-days-get-you-down/):
“Kayne Anderson Energy Total Return (NYSE: KYE) jumped 4 percent in the last month, and continues to offer a 6.5 percent yield based on distributions that have remained flat since 2008. But instead of continuing to recommend the closed-end fund, we’re taking this opportunity to purge it from our Growth Portfolio. Subscribers are advised to do the same after considering personal tax implications. The main advantage of closed-end funds is the diversification they provide, along with the convenience of a 1099 miscellaneous income tax form instead of the pesky K-1’s from each individual MLP. The downside is that closed-end funds are taxed on the distributions they receive, and often use leverage to offset that hit. But leverage can be costly. For example, the KYE, in addition to its 1.8 percent management fee and 0.2 percent cost for “other expenses” is paying 2.2 percent of assets in interest expense and distributions on mandatory redeemable preferred stock. So the total expense ratio is a startling 4.2 percent, and no amount of investing savvy is likely to offset that drag on performance in the long run. You’d be much better off buying an index-linked exchange-traded note like the UBS E-TRACS Alerian Infrastructure Index ETN (NYSE: MLPI), reviewed here (http://www.investingdaily.com/mlp-profits/articles/17821/mlp-etfs-a-taxing-proposition/). Sell KYE.

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