Investing Topics: Master Limited Partnerships

Mention master limited partnerships and sooner or later someone will bring up taxes. The big worry: A US version of Canada’s infamous Halloween Massacre of 2006, which shaved $24 billion off the value of income trusts in two weeks.

This Aggressive Portfolio holding remains one of our favorite turnaround stories.

Kinder Morgan Energy Partners LP (NYSE: KMP) doesn't understate the maintenance capital expenditures in its natural-gas pipeline segment.

Only two Portfolio holdings have yet to turn in earnings this reporting season. Aggressive Holding ENEL SPA (Italy: ENEL, OTC: ENLAY) will unveil its fourth quarter 2013 numbers on March 11. Conservative Holding Piedmont Natural Gas (NYSE: PNY) releases its first quarter fiscal 2014 results on March 7.

One pipeline company rewards investors with a 70 percent total return the year after it restores regular distribution growth. The other’s unit price falls nearly in half after it guts its payout by more than 80 percent.

Nothing stirs up fear and uncertainty like a distribution cut. And in the energy midstream business, the news doesn’t often get as bad as it did with Boardwalk Pipeline Partners (NYSE: BWP) this week.

In 2013, the Alerian MLP Index gained 27.6 percent. Energy Transfer Partners (NYSE: ETP) did much better at 43.4 percent, thanks to restoring regular quarterly distribution increases.

Kinder Morgan Energy Partners LP (NYSE: KMP) has come under fire for its tight distribution coverage and concerns that the blue-chip MLP’s size makes it difficult to grow cash flow. The burdensome incentive distribution rights that the partnership pays to its general partner, Kinder Morgan Inc. are another cause for concern.

Nothing destroys shareholder value like a dividend cut. Investors should steer clear of these names.

Oklahoma Natural Gas Company has provided regulated gas distribution service to Tulsa, Oklahoma since 1906. Today, successor company ONEOK (NYSE: OKE) serves 2.1 million customers as the largest gas utility in Kansas and Oklahoma, and third biggest in Texas.