How to Receive Dividends from MLPs

MLPs are master limited partnerships with ownership measured in units that pay distributions. Last week I wrote about two MLPs: Kinder Morgan (KMP) and Enbridge Partners (EEP). Each also finances its business with a corporation; equity is measured in shares that pay stock dividends. Some readers were confused about the corporations, especially regarding tax implications, so I will try again.Each corporation has only one purpose, owning units in the partnership. A share is backed by one unit that tracks the unit price. Stock dividends (i.e. no money) are paid based on the distribution paid to a unit and the average stock price prior to the dividend date. Shares accumulate over time, the only tax issue for shareholders is when stock is sold. Capital gains are taxed at capital gains rates. Below is a description copy/pasted from Kinder Morgan's 2009 annual report (Enbridge Partnership's description is similar):... Read more