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Dicker: Where to Be in Master Limited Partnerships

NEW YORK ( TheStreet) -- I was talking with Jim Cramer about master limited partnerships and how much they are loved for their yield.

High-net-worth investors depend upon the distributions from these investments, but over the last several years many different types of MLPs have sprung up with different models for delivering that tasty yield.

It's important for investors in these vehicles to understand the differences between MLP structures -- particularly now in a more sensitive rate environment as the 10-year Treasury bond has recovered to yield over 2%.

MLPs are coming in all shapes and sizes, some that are commodity-sensitive (will perform better or worse dependent upon the underlying price of oil or gas), others that deal mostly in terminals, others in processing and others that are more "traditional," dealing mostly as "toll roads" for energy pipelines.

Each one of these different structures will be more or less sensitive to changes in interest rates, and inside of each sub-sector individual MLPs will be relatively more or less sensitive depending on their assets, leverage, declining base and prospects for growth.

I've been doing a series of articles on RealMoney trying to isolate the safer from the more volatile names in the MLP space as investors have been scrambling to readjust their MLP portfolios to a volatile interest rate environment.

But in the video above, Jim and I try to first understand the many subsectors of what has become a very complex group of master limited partnerships.

At the time of publication the author had positions in EEP, MWE and LINE.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Dan Dicker has been a floor trader at the New York Mercantile Exchange with more than 25 years of oil trading experience. He is a licensed commodities trade adviser.

Dan is currently President of MercBloc LLC, a wealth management firm and is the author of "Oil's Endless Bid," published in March of 2011 by John Wiley and Sons.

Dan Dicker has appeared as an energy analyst since 2002 with all the major financial news networks. He has lent his expertise in hundreds of live radio and television broadcasts on CNBC, Bloomberg US and UK and CNNfn.

Dan obtained a bachelor of arts degree from the State University of New York at Stony Brook in 1982.

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MWE $0.00 0.00%
KMP $102.03 1.98%
EEP $21.64 0.00%
LINE $0.37 0.00%
PAA $22.94 0.00%


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