StoneMor Partners L.P. (STON), Terra Nitrogen Company, L.P. (TNH): A Quick Rundown of Master Limited Partnerships

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Meanwhile, investors should be wary

Many investors could get starry-eyed at the prospect of the double-digit yields that some MLP’s offer in such a low interest rate environment. However, investors need to be careful, since these high unit distributions can often distract investors from the actual state of the business.

For example, Navios Maritime Partners L.P. (NYSE:NMM), is currently yielding near 12%, but the company has a wave of charter expirations on its fleet of dry-bulk tankers in 2014, which will seriously constrict distributable cash flow, making it hard for the partnership to maintain payouts to unit holders.

In addition, Kinder Morgan Energy Partners LP (NYSE:KMP) is suffering due to its commitments to maintain a high yield for shareholders. The partnership returned $1.1 billion to partners through distributions during 2011 and $2.6 billion during 2012. However, this was almost all of the partnership’s operating income. To fund maintenance and CAPEX activities, the partnership has to borrow and issue stock to the value of $2 billion during 2011 and $3 billion during 2012, diluting shareholder value.


It appears that investors who are interested in high yields may want to consider an MLP. However, investors need to do their research and not be drawn in by the lucrative-looking yields in today’s low yield environment.

The article A Quick Rundown of Master Limited Partnerships originally appeared on

Fool contributor Rupert Hargreaves has no position in any stocks mentioned. The Motley Fool recommends Enterprise Products Partners L.P. and StoneMor Partners. The Motley Fool owns shares of StoneMor Partners. Rupert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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