Energy Holdings With Juice
Editor's Note: Jon D. Markman writes a weekly column for CNBC on MSN Money that is republished here on TheStreet.com.
With gasoline and electricity prices soaring across the country, it's time for consumers to fight back with the most awesome weapon they've got.
No, not a sledgehammer for your local gas pump or walking shoes for your commute, or even a solar-powered generator for your margarita blender.It's your investment portfolio, my friends. The theme of this idea is that if you can't beat 'em, join 'em. There's a way for you to pour money from your tank right back into your bank account. With timely, substantial stakes in a relatively new class of energy stocks that pay big, safe dividends, you can make enough steady income to pay for all your gasoline needs and then some. One nice thing is that this class of stocks is not very volatile, as it reacts little to change in the broad market or in energy prices. The formal name of this group of stocks is "master limited partnerships," or MLPs, but now that I've got all of those syllables out of the way I'll try not to repeat them. MLPs don't have any relation to energy partnerships that were sold on the private market years ago as passive tax shelters, and you are really not partnering in business with anyone. MLPs are groups of securities that you can buy and sell just like normal stocks but with one big difference: By law, most of them provide a quarterly dividend, or cash payment, that is enormous relative to their price. (Another difference, while minor, needs to be noted as well: They have some tax-related eccentricities that may give your accountant a headache when you sell.)
Fill 'Er UpHow high are MLPs' dividend yields? Very, very high compared with most stocks and quite high even compared with most utilities. The average dividend yield of the 100 largest S&P 500 Index stocks is 1.8%, and the average dividend yield of the 15 stocks in the Dow Jones Utilities Index is 2.9%. Yet the average yield of the 50 leading MLPs is a whopping 6%, and many pay 7% or more.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV