MLPs Shine Over Past Decade

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

By Nathan Slaughter

NEW YORK (StreetAuthority) -- One of the most successful high-yield energy investments in the world is a type of security few investors even know exists, let alone own.

They aren't stocks and they aren't bonds, but they are the No. 1 performing asset class of the past 10 years -- up 288%. Stocks are up just 31% during that stretch and bonds, which have been in a major bull market, are up 71%.

Many of these companies have raised dividends at an almost 10% annual pace in the past decade. And their prices have also risen, generating total annual appreciation between 15% to 20%.

That's why these investments give you the exact same double whammy -- high yields and explosive growth -- that has propelled so many big winners to the top of The 21 Best Income Stocks of the Past Decade I told you about in my previous article .

The companies I'm talking about are called master-limited partnerships -- or MLPs for short -- and they have two overriding characteristics. They are overwhelmingly in the energy business and they usually pay high yields -- 5% to 7% on average, and upwards of 13% for some profitable firms.

What drives the revenue-generating power of these companies is the business that they are in.

MLPs are publicly-traded limited partnerships that run critical "midstream" energy infrastructure. That's the pipelines, storage tanks, terminals and ships that move energy from producer to the end-user.

In short, they are the arteries through which our economic lifeblood flows.

And the beauty of MLPs is that while they are energy companies, they are insulated to some extent from price fluctuations in commodities.

For MLPs, it's more about demand. For most of their revenue, it doesn't matter whether oil is at $50 a barrel or $150. As long as the stuff keeps flowing through their pipelines, they profit -- along with their investors.

That's one big reason why MLPs have steadily churned out double-digit total returns year after year, despite volatile commodity prices.

Another reason is because MLPs pay out upwards of 90% of their profits to investors -- making them some of the highest-yielding investments on the planet.

1 2 Next › Last »