An MLP, as its name implies, is a true partnership. The distinction matters, because an MLP has two classes of partners – the general partners who are responsible for running the MLP and the limited partners (you and I) who purchase the units on the major stock exchanges.
The MLP structure incentivizes the general partners to increase distributions to the limited partners. Why? The higher the quarterly distributions paid to limited partners, the higher the management fees paid to the general partners.
Therefore, general partners are motivated to maximize distributions by pursuing cash-generating acquisitions and organic-growth projects. If the general partners enrich you, they enrich themselves.
On Thursday, I’ll discuss an interesting development with one MLP in particular that has just announced an acquisition that should drive higher distributions to shareholders. The deal is getting mixed reviews – but I’ll save that story for Thursday.
In the meantime, check out the performance of the AMJ and consider if MLP investments are right for your “growth” portfolio.
This article is brought to you courtesy of Tyler Laundon from Wyatt Investment Research.