Kinder Morgan Inc (NYSE:KMI)‘s acquisition of its associated companies has raised the question on Wall Street as to whether the Master Limited Partnership (MLP) financial structure has run its course? The Kinder Morgan group was amongst the first few who adopted to the MLP structure and was also instrumental in popularizing it, back in the 90s. The MLP structure was soon adopted by a lot of oil and gas companies after Kinder Morgan Inc (NYSE:KMI) popularized it. Basically what the MLP does is allow companies like Kinder Morgan Inc (NYSE:KMI) to pass off all their profits to shareholders as dividends, without paying any corporate tax on it, though the investors need to pay taxes on the amount of profit that they receive. So is this the end of the MLP era?
That and the play on Oil and Kinder Morgan Inc (NYSE:KMI) was the topic of discussion between Jim Cramer and the ‘Squawk on the Street’ team on CNBC.
“I thought it was interesting that he chose to use the Kinder Morgan Inc (NYSE:KMI) as the acquirer, not the Kinder Morgan Energy Partners LP (NYSE:KMP), which is the master limited partnership. This of course got rid of those incentives, the distribution rights that the people are so upset about,” Cramer said.
Cramer then went on to name other companies who are still using the MLP structure and are doing good as well, making his case that he is not going to bet against companies sustaining the MLP structure as of now. He also advised investors that if they are getting a dividend of $2 per share of Kinder Morgan Inc (NYSE:KMI), they should not sell the stock. Cramer also mentioned that even though it wouldn’t be great from tax perspectives, a lot of people have already made a lot of money through Kinder Morgan Inc (NYSE:KMI).