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

Summary and Conclusions

Although I featured 5 MLPs in this article, I did not go into the specific investment characteristics of each of these individual entities. Instead, my purpose was to illustrate the general potential benefits, risks and complexities associated with investing in MLPs. These are a unique asset class created by an act of Congress, and as such, I believe they require a special level of research and due diligence. There are many financial sites where specific information on each of these research candidates can be found.

Investing in MLPs can be quite rewarding over the long run when MLPs are purchased at sound valuations. However, assessing sound valuation can be challenging for the individual investor due to the complexities of their capital structures and the associated tax ramifications. In the video included with this article I’ve attempted to illustrate ways that the valuation assessments on MLPs can be simplified.

However, the challenge of understanding the financial statements of MLPs is very difficult – to say the least. Furthermore, I believe that MLP investing requires a significant amount of monitoring and constant due diligence. Consequently, in spite of their prodigious income distributions and attractive long-term capital appreciation achievements, I believe that MLPs should be considered a riskier investment class. Evidence to support that statement can be seen by looking at the credit ratings of the 5 featured MLPs in this article. Caveat emptor.

Disclosure: Long ETP

Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned or to solicit transactions or clients. Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. We do not recommend that anyone act upon any investment information without first consulting an investment advisor as to the suitability of such investments for his specific situation.

Note: This article is written by Chuck Carnevale and was originally published at FASTgraphs.com.