Master Limited Partnerships Continues to Pay Off

The yield on the 10-year Treasury bond has inched up about half a percentage point from its 2011 low–not enough of a move to call a bear market. But inventories of Treasury securities are building up at bond dealers, even as investors grow less fearful about the stock market’s prospects and more concerned about the Federal Reserve’s accommodative monetary policy. This confluence of developments heightens the risk that interest rates will climb in 2012.

Conventional wisdom holds that rising interest rates would also drive investors out of master limited partnerships (MLP) and other income-oriented stocks, saddling those who opt to stay the course with capital losses. The opposite has occurred since the end of 2007. The Alerian MLP Index, which tracks the 50 largest energy-related MLPs, plummeted to a 41.6 percent loss in 2008, then surged 61.9 percent in 2009 and posted a 27.4 percent gain in 2010. The index overcame a mid-year sell-off in 2011 to return 7.3 percent to investors and is up 1.8 percent thus far in 2012.

Source: Guru Focus

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