5 Fairly Valued MLPs: Is The Dilution Worth The Yield And How Do You Value Them?

Introduction
The 5 MLPs covered in this article offer yields ranging from 5.7% to 10.7%. Additionally, each of these MLPs appears reasonably valued given their high yields and prospects for growth. However, two of these MLPs are currently in the process of merging.
MLPs Simple and Complex at the Same Time
I believe that MLPs represent an investment choice that is a conundrum of sorts. In some ways, MLPs are very simple investments. They are primarily income generating vehicles that typically produce higher yields than most other investment choices. Furthermore, as a general rule, best-of-breed MLPs have a history of increasing their distributions each year. Therefore, investing in MLPs is primarily about the dividend income, or more precisely stated, the "income distributions" that they offer unit holders. On the other hand, many best-of-breed MLPs have also proven themselves to be excellent capital appreciation generators over the long term as well.
But there is also a lot of complexity associated with investing in MLPs. They have complex capital structures and many have general partner relationships that do not always favor public unit holders. Therefore, each prospective individual MLP investor should also carefully examine the partnership agreements between the general partners and limited partners. These agreements will also cover the distributable cash flow levels to include discretionary reserves mandated by the general partner.
In this same... Read more