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August 17, 2012

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Column: Are MLPs Expensive?

I have a column up at this afternoon that provides an update as to where MLPs stand on a distribution yield basis compared with treasuries, bonds and REITs.  Next week, I’m going to write another that focuses on other valuation methods for MLPs.  The aim of these columns is to get at the question that plagues many potential MLP investors: why should I invest in MLPs now, aren’t they expensive?

It is a quandary, because over the course of the brief history of MLPs, there has almost never been a bad time to buy them.  Even if you bought the MLP Index (hypothetically) at the peak in 2007 and held it to today, you would have earned a total return (including distributions) of 65.0%, or an annualized 10.3% per year over those 5.1 years, not bad considering the new normal we’ve all been forced to accept since then.   Investors have been conditioned the last few years to expect gloom around the next corner, but in reality even after a 199.1% total return for the MLP Index since the bottom in March 2009, MLPs don’t look overly expensive based on the admittedly simplistic historical yield metrics and relative to alternative yield products.  I believe you can make a case that certain individual names are overvalued, but as a sector there is a wide range of valuations.
Click over to read the article here.

Also, my offer still stands for $350 off coupons to attend the Platts MLP Conference at the Wynn in Las Vegas October 4-5.  The $350 off is $50 less than the early bird price offered by Platts right now (read more about the conference here).  Email me if interested.

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