I have owned both KMP and KMR, continuously since 2002 and in the 1990's (but I have lost the 1990's records). I now own MLP's for the income; I am semi-retired and I use the distributions to "go to the grocery store".
Currently, I have a slight preverence for KMR (I own KMR and I do not currently own any KMP).
KMP pays a cash distribution and issues a K-1 annually. KMR pays a stock distribution (technically for tax purposes it is a stock split), and does not issue a K-1 annually.
KMR advantages -
- At the current Unit market prices the yield on KMR is substantially higher (KMR $1.05/$43.47 = 9.66%; KMP $1.05/$49.55 = 8.48%).
- KMR ownership means no K-1 to deal with annually; this advantage is largely offset by adjusting tax basis each quarter with the receipt of stock distribution (split).
- I plan to sell approx the distribution shares each quarter (again this is done in order to be able to go to the grocery store). This will generate a gain/loss on sale, again offsetting the advantage of no K-1.
- There is some risk of a modest reduction in the yield advantage due to the fact the sales price formula may be unfavorable, although this quarter it appears to be slightly favorable (I will find out tomorrow - Feb 2, 2009). However, the overall yield advantage will remain significantly favorable - this is my primary reason for favoring KMR over KMP currently.