Why You Should Consider MLPs for Your Income Portfolio

• In a sea of income investment options, MLPs could be easily overlooked despite generous yields and tailwinds from free cash flow generation.
• Stable cash flows and special tax treatment have allowed MLPs to historically pay generous distributions (dividends).
• Significant changes to capital allocation over the years, free cash flow generation, and a greater focus on sustainable distribution growth can add to investors’ confidence in MLP payouts going forward.

Income investors have an overwhelming number of investment options today. The menu ranges from traditional fixed income to equity investments like REITs to innovative covered call ETFs to more exotic vehicles. Master limited partnerships (MLPs) are known for their potential to provide tax-advantaged income. But they have also generated attractive total returns in recent years. Despite positive fundamentals driven by solid free cash flow generation, MLPs may be overlooked by investors given so many income investment options. This note explains why MLPs are able to provide generous yields and why investors can be confident in MLP payouts going forward.