OMG MLPs: Huge YTD Gains and an Ugly Episode

The delightful first quarter gains in master limited partnerships (MLPs) are sure to send more income-seeking investors into the sector. The results made them look like an uncommonly easy place to make money.

Consider the returns for some of the most popular MLP funds, including the JPMorgan Alerian MLP Index ETN (AMJ); the Alerian MLP ETF (AMLP); the Credit Suisse Cushing 30 MLP ENT (MLPN); and the UBS E-Tracs Wells Fargo MLP ETN (MLPW).

AMJ Total Return Price Chart

AMJ Total Return Price data by YCharts

There were very few losers among the largest MLP companies that comprise these indices. Of the top 25 holdings in that Wells Fargo MLP, for example, returns for only two were negative; Williams Partners (WPZ) and EV Energy Partners (EVEP) were both down about 6%. Below are the top 10 holdings in the JPMorgan Alerian MLP Index. Note in the stock charts that they made money in every single one.

EPD Total Return Price Chart

EPD Total Return Price data by YCharts

MMP Total Return Price Chart

MMP Total Return Price data by YCharts

It’s fluky that so many individual shares in a sector rose in the quarter, but these kinds of companies have done famously well in recent years. The sector became wildly popular this year, especially now that income is hard to find in bonds, investors have pushed up stocks with nice dividend yields, and MLP yields are largely north of 3.5%.

On an individual basis, investment advisors are still particularly bullish on several MLPs that move and store oil and gas, in part on expectation that natural gas prices will rise and create more demand to move product from domestic fields. Large companies that are particularly popular now include Enterprise Product Partners (EPD), with a yield of 4.4%; Plains All American Pipeline (PAA), yielding 4.1%; MarkWest Energy Partners (MWE) at 5.6%; and Kinder Morgan Energy Partners (KPM) with a 5.7% yield.

Of course, investing is never as easy as it looks on good days. ETNs must be chosen particularly carefully because their investors are out cold if the underwriter goes bust like Lehman Brothers did. MLP ETFs often come with higher fees than other ETFs. Owning individual MLPs will complicate your tax returns, as they pass on the burden of paying their taxes to their investors. There have been doggy MLP funds this year too, including a few recent launches.

And lest anyone think today’s popular individual MLPs are sure things, we offer this reminder that where investors are that bought into Crestwood Midstream Partners (CMLP), Navios Maritime Partners (NMM) and Capital Products Partners (CPLP), the good guys of a couple of years ago.

CMLP Total Return Price Chart

CMLP Total Return Price data by YCharts

Dee Gill, a senior contributing editor at YCharts, is a former foreign correspondent for AP-Dow Jones News in London, where she covered the U.K. equities market and economic indicators. She has written for The New York Times, The Wall Street Journal, The Economist and Time magazine. She can be reached at



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