{"id":21757,"date":"2011-06-17T09:38:46","date_gmt":"2011-06-17T13:38:46","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=21757"},"modified":"2011-06-17T09:38:46","modified_gmt":"2011-06-17T13:38:46","slug":"this-investment-is-forced-to-pay-you-and-it-yields-6","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2011\/06\/17\/this-investment-is-forced-to-pay-you-and-it-yields-6\/","title":{"rendered":"This Investment Is FORCED to Pay You… And It Yields 6%"},"content":{"rendered":"

By DividendOpportunities.com<\/span><\/strong><\/a><\/p>\n

If you’re an income investor, you’ll want to \t\t\t\t\tsee this one. This investment…<\/span><\/p>\n

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<\/span><\/p>\n\n\n\n
\"\" Pays no corporate taxes<\/span> <\/p>\n

\"\" <\/span>Is required by law to pass \t\t\t\t\t\t\t\tthrough the bulk of earnings to investors<\/span><\/p>\n

\"\" <\/span>Acts as a “toll operator” \t\t\t\t\t\t\t\tfor the transport of America’s most-needed \t\t\t\t\t\t\t\tcommodities<\/span><\/p>\n

\"\" <\/span>Earns money from how much \t\t\t\t\t\t\t\tvolume it ships — NOT the price of the \t\t\t\t\t\t\t\tcommodities<\/span><\/p>\n

\"\" <\/span>Rarely sees any \t\t\t\t\t\t\t\tcompetition in most regions<\/span><\/p>\n

\"\" <\/span>Pays yields of 6% on \t\t\t\t\t\t\t\taverage — twice a 10-year Treasury
\n<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

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That’s a pretty impressive list.<\/span><\/p>\n

And over the past 15 years this asset class has earned a \t\t\t\t\twhopping 17% compound average annualized total return, \t\t\t\t\taccording to Morningstar.<\/p>\n

I’m talking about master limited partnerships (MLPs). You \t\t\t\t\tmight have heard of them. But I know from experience there \t\t\t\t\tare a number of income investors who haven’t.<\/p>\n

These partnerships — including the one I’ll tell you about \t\t\t\t\tin a moment — trade just like a common stock. Their \t\t\t\t\tbusinesses are highly stable. Most MLPs operate in the \t\t\t\t\tenergy sector, but they don’t buy or sell commodities. They \t\t\t\t\ttransport them.<\/p>\n

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In other words, the income of an MLP is largely based on the \t\t\t\t\tvolume of oil and gas flowing through the system — like a \t\t\t\t\ttollway — much more so than on the volatile prices of the \t\t\t\t\tunderlying products.<\/span><\/p>\n

And since MLPs are required to pay out most of what they \t\t\t\t\tearn as distributions, their yields are typically higher \t\t\t\t\tthan normal. As I noted above, on average MLPs are trading \t\t\t\t\tat about a 6% yield, double that of a 10-year Treasury.<\/p>\n

Even a recent article on Forbes.com said, “Any fan of big \t\t\t\t\tdividend stocks should take a look at master limited \t\t\t\t\tpartnerships.”<\/p>\n

I own a number of MLPs in my Daily Paycheck<\/a><\/em><\/strong> portfolio. In fact, I added units \t\t\t\t\tof Enterprise Product Partners (NYSE: EPD<\/a>)<\/strong> just about \t\t\t\t\tthree weeks ago. (MLP shares are technically called \t\t\t\t\t“units.”)<\/p>\n

This MLP has raised its dividend for 27 consecutive quarters \t\t\t\t\t— which is an income investor’s dream come true.<\/p>\n

I’m glad I found it, as MLPs can be good investments in \t\t\t\t\tchallenging economic times — especially for investors who \t\t\t\t\tdepend on a steady income stream. During the last recession, \t\t\t\t\tmany “regular” companies cut or suspended their dividends to \t\t\t\t\tpreserve capital. But almost every MLP increased their \t\t\t\t\tdistributions during the downturn.<\/p>\n

Now, MLPs aren’t immune to market risk. So if we get a \t\t\t\t\tmarket correction, the unit price of MLPs will trend with \t\t\t\t\tthe market. But that income stream is likely to keep on \t\t\t\t\tflowing and growing.<\/p>\n

And that’s why I hold several in my real-money Daily Paycheck<\/a><\/em><\/strong> portfolio.<\/p>\n

I always reinvest my dividends. The compound growth of \t\t\t\t\tdividend reinvestment is pretty powerful on its own. But use \t\t\t\t\tthe technique with securities also raising payments, and \t\t\t\t\tyour dividends can rise even faster.<\/p>\n

For instance, I was able to boost my income by 9.9% from one \t\t\t\t\tMLP in just one year. Of course the icing on the cake was \t\t\t\t\tthat the MLP gained 38.9%.<\/p>\n

Now imagine that over an entire portfolio.<\/p>\n

Take a look at the chart below. It shows the monthly \t\t\t\t\tdividends I’ve received each month. At first glance, it \t\t\t\t\tlooks lumpy. But remember that many stocks pay quarterly — \t\t\t\t\tyou can expect larger checks in January, April, July, and \t\t\t\t\tOctober, which are the most common months for dividends to \t\t\t\t\tbe paid.<\/p>\n

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\"\"<\/span><\/p>\n

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But there’s little doubt the payments are rising, and \t\t\t\t\tthat simply makes the future payments larger, without me \t\t\t\t\thaving to add another dime.<\/span><\/p>\n

Keep in mind that all this is done with a portfolio of \t\t\t\t\t$200,000 in actual cash (StreetAuthority actually buys the \t\t\t\t\tstocks held in my Daily Paycheck<\/em> portfolio). But the results \t\t\t\t\tare fully scaleable.<\/p>\n

If you have half that amount to invest, simply cut the \t\t\t\t\tmonthly dividends above in half. If you have $400,000 to \t\t\t\t\tinvest, you can double the numbers.<\/p>\n

For example, my boss Paul Tracy is actually the one who \t\t\t\t\tcreated the “Daily Paycheck” strategy. In December, he \t\t\t\t\ttopped $6,000 in monthly dividends, after reinvesting for \t\t\t\t\tjust a few years. You can read his first-hand account here<\/a><\/strong>.<\/p>\n

And if you want to get started on a “Daily \t\t\t\t\tPaycheck<\/a><\/strong>” portfolio of your own, MLPs like \t\t\t\t\tEnterprise Product Partners aren’t a bad place to look — \t\t\t\t\tespecially given the possibility of a downturn in the overall market.<\/span><\/p>\n

Always searching for your \t\t\t\t\tnext paycheck,<\/span><\/p>\n

\"\"
\n\"\"<\/span>
\nAmy Calistri
\nChief Investment Strategist — \t\t\t\t The Daily Paycheck<\/a><\/em><\/strong><\/span> <\/em><\/span><\/p>\n

<\/em>P.S.<\/strong> — I’d be remiss if I didn’t mention the tax \t\t\t\t\tcomplexities of MLPs. Since they are technically a \t\t\t\t\tpartnership, taxes are a little trickier than with regular stocks. They also aren’t ideal for holding in tax-deferred \t\t\t\t\taccounts. For more information, click here to read more<\/a><\/strong> from our sister site, \t\t\t\t\tInvestingAnswers.com.<\/p>\n","protected":false},"excerpt":{"rendered":"

By DividendOpportunities.com If you’re an income investor, you’ll want to see this one. This investment… Pays no corporate taxes  Is required by law to pass through the bulk of earnings to investors Acts as a “toll operator” for the transport of America’s most-needed commodities Earns money from how much volume it ships — NOT the … <\/p>\n

Continue reading “This Investment Is FORCED to Pay You… And It Yields 6%”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-21757","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/21757","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=21757"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/21757\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=21757"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=21757"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=21757"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}