Friday, August 23, 2013

Dividend and Income - Master Limited Partnerships for your consideration

Two master limited partnerships (MLP's) came to my attention through some very good work done by Mr.  Dorsey   which he published on Seeking Alpha's website.  

MLP's have long been a favorite of income investors because they pay hefty yields.  Few, qualify as dividend machines because their earnings are all over the place.   However, if you take a long term view, you might consider one or both of the two partnerships reviewed below.

Let's analyze how two MLP income potentials stack up. 

Magellan Midstream Partners - MMLP

This company came public in 2002 and immediately started paying dividends.   Ten years ago, if you owned it before the end of October your quarterly dividend would have been $.50.    If you own it this October, you dividend will be $.78.   That is a yield of 6.87% which is mighty nice; and it illustrates that over time your dividend increase is a total of 35.89% over 10 years.   This table presents MMLP's dividend fundamentals.


Plains All American Pipeline - PAA

PAA is an even better deal, I think.   This stock sports a dividend yield of 4.58% which is less than MMLP but the dividend growth has been  114 % over 10 years due to both dividend increases and a 2:1 stock split in 2012.    PAA carries more debt than MMLP but it has a couple of call options worth your consideration which boosts PAA's income potential well beyond MMLP. 

The three tables below present PAA's dividend fundamentals and the income analysis of selling either a November of January call.

PAA Dividend Fundamentals

PAA November Call

PAA January Call


Do not put all your money into MLP's but prudent dividend and income investors might consider these stock for the income producing portion of their portfolios.

The Money Madam