Fear-mongering elements within the financial media have raised the specter of a bubble in energy-focused master limited partnerships. We examine the validity of these claims, highlight some of the bigger-picture risks to the MLP party and emphasize the importance of looking beyond distribution yields to the potential risks and rewards embedded in your portfolio.
Over the past decade, the current universe of energy-focused MLPs has closed 689 acquisitions--a total value of $236.9 billion. With $32.2 billion worth of transactions announced thus far in 2013, these roughly 100 publicly traded partnerships appear on pace to match last year’s total.
Investors should expect this boom in mergers and acquisitions to continue. We examine the factors driving this trend and highlight a handful of potential takeover candidates.
Prospective investors in a master limited partnership (MLP) must understand how much the general partner receives in incentive distribution rights and the extent to which this cut inhibits or promotes the limited partners' distribution growth.
When I first partnered with my longtime friend Elliott Gue on Capitalist Times and Energy & Income Advisor, I took a hard look at the names in my coverage universe that had either cut their dividend over the past year or were at risk of reducing their payout. Two of the downtrodden--Atlantic Power Corp (TSX: ATP, NYSE: AT) and Just EnergyGroup (TSX: JE, NYSE: JE)--earned Hold ratings after intensive scrutiny.
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