Outrageous Opportunities in Upstream MLPs

Publicly traded Master Limited Partnerships (MLPs) are great income vehicles which avoid both federal and state corporate income taxes by passing through expenses and income to the investor. <!--more-->Depending on the MLP, quarterly distributions may be either partially, or entirely, tax-deferred. There are some limitations to holding them in tax-deferred accounts, such as IRAs, so consult a tax advisor before you buy.

The MLP structure requires a steady and dependable revenue stream. For this reason, MLPs have traditionally been oil and gas pipeline companies, such as Kinder Morgan Partners (KMP) and Oneok Pipelines Partners (OKS). However, in recent years, a number of upstream Oil and Gas producing MLPs have come to market. These companies use extensive hedging to assure a steady revenue stream from an otherwise unpredictable commodity market.