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Energy Companies With Safe(er) Yields?
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Looking for a big dividend yield but not the risk of BP [BP
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]? You might want to check out this trade.
According to Raymond James analyst Darren Horowitz there are stocks in the energy space that could still generate steady income - master limited partnerships.
First things first – what’s a master limited partnership?
Master Limited Partnerships (MLPs) are unique investments that combine the tax benefits of a limited partnership (LP) with the liquidity of common stock, according to the website Investopedia.
An MLP has a partnership structure but issues investment units that trade on an exchange like common stock.
In order to qualify, a firm must earn 90% of its income through activities or interest and dividend payments relating to natural resources, commodities or real estate.
Sounds too good to be true - is there a catch?
Sort of.
In an MLP, instead of paying a corporate income tax, the tax liability of the entity is passed on to its unitholders. Once a year, each investor receives a K-1 statement (similar to a 1099-DIV form) detailing his or her share of the partnership's net income, which is then taxed at the investor's individual tax rate – again according to the website Investopedia.
Now what’s the trade?
Darren Horowitz brings the desk three of his favorite names in the space. They are Enterprise Products L.P. [EPD
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], Plains All American L.P.[PAA
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] and Williams Partners L.P. [WPZ
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], .
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Trader disclosure: On June 14, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour owns (AAPL); Edwards owns (PM); Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; Finerman’s firm own (AAPL); Finerman owns (AAPL); Finerman’s firm owns (BBY); Finerman owns (BBY); Finerman’s firm owns (BP) calls; Finerman owns (GLW); Finerman’s firm owns (HPQ); Finerman owns (HPQ); Fienrman owns (RIG) calls; Finerman’s firm is short (IJR); Finerman’s firm is short (MOY); Finerman’s firm is short (SPY); Finerman’s firm is short (IWM); Terranova owns (IPSU), (BX), (PFE), (GMCR), (RSX), (TER), (AXP), (BMO), (BBY), (DIS), (XCO), (SWN), (GLD), (AAPL), (IPI), (SU), (V), (TEVA); Terranova owns UK Pounds; Terranova owns Euros; Terranova is short the US Dollar
For Tim Seymour
Seygem owns (MTL)
For Joe Terranova
Terranova works for (VRTS)
Terranova is chief market strategist of Virtus Investment Partners, LTD.
Virtus Investment Partners owns more than 1% of (AMKR)
Virtus Investment Partners owns more than 1% of (IGE)
Virtus Investment Partners owns more than 1% of (DBV)
Virtus Investment Partners owns more than 1% of (XLB)
Virtus Investment Partners owns more than 1% of (XLV)
Virtus Investment Partners owns more than 1% of (XLY)
Virtus Investment Partners owns more than 1% of (XLI)
Virtus Investment Partners owns more than 1% of (XLU)
Virtus Investment Partners owns more than 1% of (DRYS)
Patty Edwards
Edwards owns (HES) for clients
Edwards owns (XOM) for clients
Edwards owns (RIG) for clients
Edwards owns (NE) for clients
Edwards owns (SLB) for clients
Edwards owns (HAL) for clients
Edwards owns (WFT) for clients
Edwards owns (DO) for clients
Edwards owns (GLW) for clients
Edwards owns (BBY) for clients
Edwards owns (CVS) for clients
Edwards owns (V) for clients
Edwards owns (AKAM) for clients
Edwards owns (AAPL) for clients
Edwards owns (DELL) for clients
Edwards owns (HPQ) for clients
Edwards owns (INTC) for clients
Edwards owns (TXN) for clients
Edwards owns (NVDA) for clients
Edwards owns (STM) for clients
Edwards owns (CSCO) for clients
Edwards owns (SPY) for clients
Edwards owns (QQQQ) for clients
Edwards owns (PM) for clients
Dennis Gartman
Funds Managed By Dennis Gartman Are Short Yen
Funds Managed By Dennis Gartman Are Long Canadian Dollar, Australian Dollar
Mike Khouw
Cantor Fitzgerald makes a market in (HOT)
Jon Najarian
Jon Najarian owns (NYX) and seats on the exchange
Jon Najarian owns (CME) and seats on the exchange
Jon Najarian owns (CBOE) and seats on the exchange
Ed Mills
***No Disclosures***
Darren Horowitz
Raymond James & Associates received non-securities-related compensation from (EPD) within the past 12 months.
Raymond James & Associates received non-securities-related compensation from (PAA) within the past 12 months.
CNBC.com with wires
Data is a real-time snapshot *Data is delayed at least 15 minutes
