Master Limited Partnerships (MLPs): A Great Long Term Investment for All Demystified

When investing, many people overlook Master Limited Partnerships, which are commonly referred to MLPs. Master Limited Partnerships are limited partnerships that are publicly traded on the stock market. In a MLP structure, the Limited Partner receives distributions from the company's cash flow, while a general partner receives compensation linked to the performance of the company for managing it. To be categorized as an MLP, the company must mainly earn cash flow from commodities, natural resources, and real estate.

Why invest in a MLP? 
Income - MLPs have a significantly higher dividend yield than other stocks. The average MLP have a dividend yield of about 6% while the average stock in the S&P 500 has a dividend yield of 2%. 
Tax efficiency - MLPs do not experience double taxation as only the shareholder pays taxes on income. The income from distributions are recognized in the year when an investor sells their investment, or when the cost basis of the investment reaches 0. The shareholder is then taxed at their individual tax rate for this income. Depreciation is then deducted from these distributions, which means the amount that investor pays in taxes on is ultimately much less than the gross amount of the distribution the investor receives.


You definitely would want to evaluate every MLP to see if it is right for you.