As detailed in previous articles on this site, oil and natural gas stocks can be profitable long term investments. Companies such as ConocoPhillips (NYSE: COP), Chevron (NYSE: CVX), and Exxon Mobil (NYSE: XOM) are blue chips in every way providing a solid total return. Promising small caps such as Octagon 88 (OCTBB: OCTX) and Americas Petrogas (TSX: BOE) offer tremendous growth opportunities. To add more diversity and depth, there are publicly traded master limited partnerships (MLPs) such as Enbridge Energy Partners (NYSE: EEP) and Kinder Morgan Energy Partners (NYSE: KMP).
MLPs are publicly traded limited partnerships. There are tax benefits in the way that profits are distributed. The liquidity is also a major advantage of MLPs. The high dividend income can be far superior, too.
The average dividend yield for a member of the Standard & Poor’s 500 Index is about 2%. For Kinder Morgan Energy Partners, the dividend yield is now 6.2%. The dividend yield for Enbridge Energy Partners is 7.36%.
Both of these MLPS have performed very well. For 2013, Enbridge Energy Partners is up more than 11%. Over the last month, Kinder Morgan Energy Partners has risen more than 1.5%. Combined with the high dividend yield, that makes for a solid total return.
There is an exchange traded fund for the MLP sector, Alerian MLP ETF (NASDAQ: AMLP). The Alerian MLP allows for investors to buy one security that contains a wide variety of MLPs. This protects the investor through greater diversity in their holdings. It also reduces expenses, as only one security has to bought.
The chart below shows the performance of the AMLP. For 2013, the Alerian MLP is up more than 14%. It has a dividend yield of almost 6%.