Steady Cash Flow Girds MLPs for Yield That Beats Treasuriesby
My inbox has been flooded by Wall Street strategists commenting how Bank of England Governor Mark Carney has co-opted Fed Chairman Ben Bernanke's playbook as his own in today's news conference . Two key points:
1. Thresholds defining how long policy stays accommodative in the U.K. that are strikingly similar to those in the U.S.: unemployment of 7 percent and inflation of 2 percent in the U.K. , vs. 6.5 percent and 2.5 percent in the U.S..
2. A new emphasis on so-called forward guidance, which the policy team at Strategas Research has dubbed "The New QE."
Bottom Line: low rates are likely to persist for at least two more years, regardless of whether central banks rein in their bond purchases. This is a view echoed by Pimco's Bill Gross . Still, one could ask who wants to own 10-year paper paying 2.6 percent.
Now for the good news: you don't have to settle! There are alternatives for investors seeking yield, even in a low yield environment. For example, there's the 6.3 percent yield generated by our list of select master-limited partnerships:
MLPs generate cash flow by collecting fees from highly repetitive activities like pipeline transport, oilfield services and monthly rents. They must distribute 90 percent of profits annually on a monthly or quarterly basis, which tends to create a stable return for investors.
Here are ten MLPs that pay dividends yielding more than 5 percent, and have increased payouts at least 5 percent annually during the past five years.
Fewer than 200 MLPs trade publicly in the U.S., though there's plenty of room in the portfolio for winners. Our group of ten is handily beating the market this year.