Master Limited Partnerships, commonly known as MLPs, are limited partnerships that trade on securities markets like normal stocks. MLPs are not subject to income tax, and shareholders in MLPs are actually “limited partners” in company.
Their special tax designation allows MLPs to pass the tax burden onto their shareholders, but they are required to pay the vast majority of their earnings out to their partners, similar to REITs. Because of interesting tax quirks in the MLP structure, read Master Limited Partnerships, Taxes & Your IRA to understand why IRAs may not be the best place to hold your MLPs.
If you’re looking to invest in dividend-paying master limited partnerships, you may also be interested in dividend-paying MLP exchange-traded funds. These funds offer a diversified dividend payment based on a basket of master limited partnerships holdings. ETFs are similar to equities, in that they are investment structures that are traded on stock exchanges. They are also similar to mutual funds in that they hold securities of many companies.
3 Reasons to Invest in dividend-paying MLP ETFs:
- Instead of putting all your eggs in one basket, you get a diversified dividend payment based on a basket of MLP stocks.
- All ETFs have very low fees and can be traded just like stocks.
- It’s easy to gain exposure to many dividend-paying MLP stocks with just one vehicle (ETF).
Whereas, if you’re interested in investing in individual MLP stocks, the table below lists them all: