This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Dicker: The MLP Craze

NEW YORK (TheStreet) -- I was talking to Jim Cramer today about master limited partnerships, or MLPs, and why there's a mad rush for energy companies to create them.

The MLP structure is tax-advantaged because MLPs are forced to disburse most, if not all, of their profits as distributions to their shareholders. That direct distribution becomes an incredible opportunity only in a very low interest rate environment as investors continue to search hard for yield.

And that yield craze is exactly what benefits the energy companies who have been rolling out MLP IPOs as fast as they can. They install themselves as large shareholders of the newly public company, monetizing their storage and transport assets and using the cash flow from distributions to help finance other capital expenditures. And when the retail customer takes the price for the new IPO up, the energy often can then sell their ownership interest for a big cash infusion, at a price that they'd never realize with a pure asset sale to another energy company.

This is what happened with Chesapeake Energy (CHK) and its MLP rollout Chesapeake Midstream Partners (CHKM). The early IPO price was incredibly cheap compared to their likely distributions. But as the MLP share price rallied, Chesapeake sold its interest.

As Chesapeake ended its direct connection with its MLP, Chesapeake partners renamed itself to Access Midstream Partners (ACMP). But the point is that this maneuver and the cash flow that came from it was a tremendous winner for Chesapeake and one of the main reasons that Chesapeake did not threaten bankruptcy in 2012, which I thought was a very possible outcome.

I talk more about MLPs -- which ones should be bought and when -- with Jim in the video above.

At the time of publication the author had no position in any of the stocks mentioned.

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

Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned.

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.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

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.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,098.45 +18.88 0.11%
S&P 500 2,003.37 +6.63 0.33%
NASDAQ 4,580.2710 +22.5760 0.50%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs