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How to Invest in MLP Stocks
July 2020

By Ellen Chang

The midstream sector supports the oil and gas industry's infrastructure needs and can increase diversification in a retirement portfolio since it generates higher yields.

Investors typically invest in large integrated exploration and production names from the energy sector, as well as utility companies for additional income, and often overlook the midstream sector, says Michael Underhill, chief investment officer at Capital Innovations in Wisconsin.

Many MLPs, or master limited partnerships, are energy pipeline companies, while others transport, process or store crude oil, natural gas and natural gas liquids, says Stacey Morris, director of research at Alerian, a Dallas-based financial information services company for asset managers and investment professionals.

Advantages of MLPs

MLPs provide exposure to the cash flows of North American energy infrastructure companies in a tax-advantaged structure, says Loren Asmus, vice president of investment research at Canterbury Consulting, a Newport Beach, California-based investment advisory firm.

They have generated elevated yields compared with other income-generating securities in recent years, but this has also produced significant volatility.

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