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Plains All American Pipeline, L.P. Message Board

  • philippians4and13 philippians4and13 Aug 19, 2011 2:43 PM Flag

    PAA or instead an MLP that pays stock dividends

    PAA pays cash quarterly. EEQ pays stock dividends quarterly. Here are some comments on the differences and other aspects of EEQ and some competitors of PAA:

    A Seeking Alpha contributor today recommended EEQ and EEP. Here is an excerpt:

    "I favor Enterprise Products (EPD), Kinder Morgan (KMP) (KMR) and Enbridge Energy (EEP) (EEQ). The first 2 are the 2 largest MLPs with long track records raising distributions annually for more than 10 years. The stocks of Kinder Morgan (KMR) and Enbridge Energy (EEQ) are included for those who do not need current income, but would rather receive stock dividends which do not generate 1099s. EEP is my favorite. It brings 2/3 of the Canadian oil (Canada is the largest supplier for the U.S.) to Cushing, Oklahoma and has a substantial natural gas business centered in Oklahoma.

    Enbridge, Inc (ENB), a large Canadian energy company, is the general partner (manager of the business at EEP). During the financial meltdown in 2008, it purchased more than 16 million units of EEP at $30.76, for approximately $500 million. The investment was made to finance growth projects at EEP and give it increased participation in EEP growth. When money was not readily available, that investment was critical for the 2009 capital program at EEP. EEP expanded its Clarity natural gas pipeline and the second stage of Southern Access pipeline which was opened in April 2010. The investment doubled."

    EEQ shareholders are not subject to any Canadian tax on dividends or income, yet EEQ gives you a nice diversification of your MLP investments. If we face at least 2 more years of low interest rates, yield-hungry investors will increasingly look at MLPs and other dividend-paying assets.

    EEQ also is nice because you don't get taxed on the dividends. You are only taxed if you choose to sell shares, and that is taxed at capital gain rates, not dividend rates. Even if a surprising thing occurs and the Democrats gain Congress in 2012 and raise tax rates, you can control when you have to pay tax by deciding when to sell EEQ.

    Disclosure: I added to EEQ this week with the market down. Neither EEQ nor EEP are a large position of my overall portfolio (less than 1%).

32.45-0.19(-0.58%)Oct 21 4:03 PMEDT