MLP Tax Guide: Key Issues And Benefits To Be Aware Of

Master Limited Partnerships, or MLPs have become an increasingly popular equity class, and for good reason. With most MLPs concentrated in the midstream sector (i.e. gathering, storage, and transportation of oil & gas), the business model for many MLPs is built around long-term contracted, fixed-fee, tollbooth style cash flow.

Since most MLPs pay out almost all of their distributable cash flow, or DCF (MLP equivalent of free cash flow and what funds the payout), MLPs generally offer attractive high-yields, which has attracted massive investor attention in this age of historically low interest rates.

Of course, on Wall Street there are always tradeoffs, and MLPs, like all equities, come with certain risks that investors need to understand before investing their hard earned money.