In the details the can invest (the 3 I looked at) into C Corps or MLPs as long as earnings are passed through. There are at least 5 in the "MLP" universe that have chosen to be taxed as LLCs and more to come.
IMO Kinder is doing this because there is no other way that the group can catch up with EPD in what really counts today: natural gas liquid production and exports..through its fractionation operations, the new PDH plant being built, and its propane,condensate,and ethane exports EPD is really scoring...add in no IDRs and EPD has really gained the high ground. Once Kinder gets the financial war chest built I think that there are two targets that Kinder will pursue simultaneously: Targa and MWE. Targa brings in the fractionation and export facilities and MarkWest is building a dominant midstream position in the Marcellus/Utica. Even if Kinder has to sell off a bunch of pipelines to satisfy the US Govt I think Kinder would be happy....
The real world reality is that most entering that type of security has income well in excess of $73K which more than equalizes the distribution/dividend
Less than $73K on a combined income in the real world and I don't know where one would find $.50 to invest..... and factor in that most small income investors invest through 401Ks if they invest at all and stocks are rarely an option for "low" income investors in those vehicles
Those that are looking at yield producing equities have significant 2014 type income and $73K is nothing in 2014 terms... not to mention those with the really big bucks/incomes have to pay income rates on dividends which destroys KMI as an alternative.... so maybe the guy buying 100 shares (more than 5% of income for a less than $73K earner) if they can afford it considers KMI.... IF I'm a Dr. with a decent portfolio and I'm looking to shelter $250K do I like EPDs 3.7% tax differed yield or do I like KMIs $4.5-5% yield where I could be paying 30+% Fed + 8-10% State..... ouch.......
Sheltering income from taxes will always be a priority of investors
Look at the financials... EPD has Greater revenue... greater profit.... and less tax than the combined Kinder Franchise
yet Kinder's combined mkt cap now sits above $100 billion... and EPDs is $70 Billion.. Kinder is more than 43% greater cap... how would a 43+% pop in the EPD unit price feel
There's gonna be some movement towards equalization and now matter how you slice it EPD wins because IF our unit price increase dramatically EPDs cost of capital goes lower still.... Kinder decreases... and the cost goes right back up wiping out the reason for the deal in the first place
The merger of the KMP properties does something that no one has really talked about yet. The new structure will be a C-corporation. Mutual and closed end MLP funds will be forced to unload Kinder positions and reallocate into other existing MLP's. I believe the Kinder deal was 90 billion. That's a lot to reallocate in a 600 billion dollar industry.
Sentiment: Strong Buy
We will be in an environment where investors are looking at them head to head and the equalization of share price will make it quicker and simpler to see EPDs strenghts
I think in terms of dollar-for-dollar, not share-for-share. What difference does it make whether I have 1000 or 2000 shares if the dollar amount is the same? At the end of the day, it's the money that matters.
interestingly exactly where KMI trades..... so that means you can take your KMP conversion shares and turn them into an equal # of EPD shares and get a higher after tax return with EPD
Well as has been pointed out EPD does not have a GP that gets IDRs so the move would just tax all of EPDs income at the corporate level so anyone who has speculated that EPD would follow suit is a moron
I'll bet the douche just want to make it appear that the KMP deal is good so he is just a foolish talking head
The most unlikely scenario is that MLP structure will go the way of the dinosaur....... which would bring up the question of what did KMI know and when did they know it?
Price targets are meaningless numbers. All predictions should be taken with a small grain of salt. My biggest concern is that Jim Cramer just recommended buying EPD. He's an obnoxious buffoon and a tout. CRAMER'S THE KISS OF DEATH!
Are there any other MLPs besides EPD that offer a discount on their DRIPs? I participate in the EPD DRIP, and it seems almost too good to be true.
KMPs greatest achievement in its merger will be to drive its largest competitors cost of capital lower (thru higher unit price) while making it that much more attractive at the same time
KMP is changing the playing field and with this change MLPs will be more attractive and may not see the pressure they might have seen as rates rise
KM changed to eliminate the IDRs. EPD has none! Also seems you and other do not get that the cash plus the increased growth in the payout mean almost exactly the same dividend to the penny. Plus if you sell (other than KMR) you do not have recapture at ordinary income rates and all payouts are at dividend rates. Last I looked if your income for a married couple is under $77K the rate on dividends is ZERO! Think you need to look at the consequence of selling MLPs like EPD. A C corp has advantages too.