Regarding an MLP in a 401-k or IRA:
There's a "Gotcha" buried in here...it is called "Unrelated Business Taxable Income"...UBTI, for short.
I'm fuzzy on the details. There is an upper limit of income (perhaps $1,000?) that an IRA/401 can receive with no problems.
Beyond the limit, your tax complications increase.
Sorry...I don't know all of the details. Ask your tax preparer for the real skinny.
As I understand it , there is no UBTI involved in KMR or EEQ . I've owned KMR in a IRA for a long time. Any funds drawn from a IRA are taxed at a regular rate which I've never worried about since I have so many write offs from my income property. I thought about a closed end fund but don't like the high management fees.
Thanks for the question. As always...it depends. If your investment horizon is long term, then there is no reason not to pull the trigger now, as it is yielding 12%. I believe the price will still fluctuate, but my philosophy when I bought was that I am locking in an equity at the about average stock market historical return in form of their distribution tax deferred, and still have a very good likelihood of it returning to the mid-30's to low 40's. On the other side, how mad would you be if you missed the run up and had to settle for a lower yield? I believe the risk vs. return premium is skewed toward buying sooner rather than later.
Also, there are analysts at Citi (I believe) who place fair value in the 50's in the next 12 months. Not that we can trust anyone from Wall St. these days, but it is at least another indicator that many believe in the future.
If your are a short term investor, you can pick it up after the ex-div date for the price less the distribution and see how the market reacts, but having played the short term game for years (not MLP's), I wouldn't recommend it. Too much uncertainty, in general.
Let me know if you have any other questions.
ACE_IV , I own a lot of KMR and thought that I shouldn't put all my eggs in one basket so thought of diversifying by buy some EEQ for my IRA account but I wonder how much difference is there since their in the same business? I have trouble finding REITS or financials that I feel comfortable in buying. Thanks
SHORT Position Grechler20??? State your facts, prove your theory...otherwise you are just another clown poster. Did you listen to the last 3 CEO presentations? Have you read about their depreciation values? Do you know about the projects coming online in the next 18 months? Have you reviewed their distribution history? Do you see how they structure their contracts with customers? Have you reviewed the management team? Do you discount the general partner adding $500 million recently? What do you base your insight on? What is your experience, background, education, and special skills that allows you to make such a brash statement. While there is a chance (always possible, I guess)they could slash their dividend, even then it could be good for the long term...such as they take our current 12% yield and invest it in a project yielding 16% or more.
Bottom line...we will see next week...one of us will be right and the other is a fool...I really like my chances - good luck on your wishful thinking and I'd cover your short position if I were you :)