Selling over fiscal cliff concerns "makes no sense" with MLPs
He pointed to the Alerian MLP [AMLP 15.8101 -0.0599 (-0.38%) ], which investors have been dumping. “It lends itself to panic selling, and that’s what it looks like right now,” said Massocca.
“Utilities got killed and that makes sense. That’s a qualified dividend,” he said. “It makes no sense with MLPs. They’re not qualified dividends.”
Stovall said a change in the dividend rate could actually be an advantage for MLPs. “REITs will probably look a little more attractive under the new (possible) tax environment because there’s a more level playing field, the same as limited partners,” he said.
While MLP's are not qualified dividends, I presume they will be subject to the new 3.8% Obamacare tax and any other tax increases instituted January 1st. If so, ETP's selling pressure may still be modest because most people probably don't have a lot of gains to protect (only distribution income), unless they have been holding a very long time. A KMP investor may be in a different situation given that stocks rise in the past year or two.
The 3.8% Medicare tax will affect traders, more so than investors, since it's a transaction-based tax. If one buys and holds ETP primarily for the income (and, hopefully, some appreciation), it won't be an issue as long as one's adjusted cost basis is $0 or above.