Hope you don't put to much faith in Kurt Wulff. He is very loose when it comes to the facts. He has a habit of stretching and dropping innuendos....other than that, actually most of the GP's have large stakes in the MLP's...KSL owns a huge piece of KPP, KMI owns a huge chunk of KMP, PLX owns a huge chunk of PAA, MWP owns a huge chunk of MWE...have you read Wulff's comments on Rich Kinder, he blasted Richard Kinder yet never mentioned how Kinder recieves just $1 a year in salary, no options, no bonus and owns 20% of the company...hmmm sounds like Wulff has a hidden agenda.....Wulff couldn't be more wrong, he was telling everyone to sell KMI(at the exact same time that the street.con and Prudentials Carol Coale were doing the same) at $34, now its at $54...he said XOM was a candidate to raise the divi..they didn't but KMI raised there dividend 160%(actually more because it went from .20 to .40 to .6 to 1.6 in about a years time) and Wulff blasted them for it saying it was an fiscally unsound....I am a very respectful person and use the term fool very sparringly but Wulff joins Gray Davis and a select few as fools, in my book.
I was a big fan of MLP's, until I read mcdep.com, and was alerted to the cash distribution ratios. It seems when they are intially formed, all the MLP's are setup to split the cash between the GP and the limited partners somewhat equitably (my opinion). But many of the MLP's have "incentive" clauses, so that as the amount of the distribution increases, the GP gets a larger share. It doesn't seem reasonable to me that the GP should be getting 50% of the cash (above the minimum distribution)...BPL I believe is in this "phase" now, so I sold mine. Usually, the GP owns a very small amount of the equity, but the "incentive plan" provides them with windfall profits. I still own NBP and KPP...think the GP only gets like 30% of the excess cash...but plan to sell when the next "ratchet up" to 50% occurs.
Here are some MLP's that I own:
KPP GP takes 30% above $.70, current dist is $.75
NBP GP takes 25% > $.715, 50% > $.935 ... current rate is $.80...I'll sell my NBP when the distribution hits $.935
PAA GP takes 25% > $.495, 50% > $.675... current rate is $.5125...I"ll sell when I have to pay 50%
HPG GP takes 25% > $.635, 50% > $.825 current dist is $.6375
Great bridge. Actually NY has some real beauties. I also really like the Brooklyn and Williamsburgh Bridges and the Verrazanno Narrows Bridge.
My wife and I are headed to Lambertville NJ this weekend for an auction. Since we each have our particular favorite, depending on the time of day we hit the metropolitan area, there could be a pretty good argument about our route.
The yield usually follows the distribution, if they are paying $1 and the stock is at $10, then when they boost the distribution to $1.10 the price usually tends to trend up to $11 in order to keep the 10% yield(i chose some simple numbes but the point remains the same). So basically you are getting about a 20% return. Thats the beauty of those "stodgy" MLP's...its not just the nice distribution but the fact that it grows and drags the price up with it. Again, let me cite some of the more established MLP's that I am either in or have been in and out of, BPL, EEP, EPD, NBP, KMP...decent return on the distribution(i.e 6% ballpark yield) plus a decent return on the stock price increase(10%ish)...ever growing distribution.....don't underestimate the power of the tax advantages either.....
They don't set the world on fire and you aren't going to get massive growth because they are very stable, fee based, slow growth assets...very toll bridge like.
I am definitely the wrong person to answer this question because I have got GEL totally wrong over the last year but here's my honest answer to the best of my ability--irrational exuberance.
Well a little irrational exuberance but most MLP's trade in the 6%-8% range. Now that GEL's dividend(ok, actually distribution) is at .60 people are driving the price up so that it will be in the same ballpark in terms of yield. Look at NBP, MMLP, GTM, KMP, EEP, EPD, SXL, XTEX, MMP, APL, BPL...for comparable yields.
I really think people misunderstand the power of MLP's and how incredibly fast they can grow, all it takes are a few acquisitions at 5x or 6x distributable cash flow, and it amounts in massive accretion to the distribution. They are cash machines if run correctly...just look at Kinder Morgan (KMP) and drop in on the board some time...you'll find alot of very bright posters and alot of satisied unit holders....also, for a negative outlook on MLP's, take a look at Kurt Wulff(Mcdep.com).