MLPs are not traded as stocks.... They are units in a partnership
MLPs do not pay dividends.... They pay a complicated tax differed distribution
How do you pay a high yield on a $90 unit???? The distribution would have to be close to $6....
Thats more than 3Xs what EPD currently pays.... EPD currently has 2+ Billion shares and pays $1.58... Thats $3+ Billion in distributions.... For that $90 unit to yield 6% it would equate to $10+ Billion a year in distributions.... Where would that kind of money come from...
MLPs historicaly are bought for their high yield dependable income streams... The units are not really an in demand investment when the yield drops so yield supports price
KMP paid every last available cent available to unitholders.... It was unsustainable.... The parent GP c-Corp KMI took them over causing a massive tax hit to the MLP unitholders.... KMI continued to think that as a C-Corp they could continue to pay every last available cent as a distribution... While funding all capex via share offerings and debt.... That model failed famously
Why I have been outspoken in the past about more of EPDs available cash to be paid to unitholders.... EPD is in fact better off having used so much organicly produced cash for growth (still believe there is room for an acelerated distribution but this Qs #s were scary)
Partnerships have advantages.... But they also have some big disadvantages as has been evident over the past 18 months... I probably confused you even more after this but ask the same question of arbtrader.... He can give a far better explanation than I could because my rediculous mind moves far faster than I type and never go back and correct myself
While the perception is that EPD is grossly undervalued..... Its current 6% yield is its historical average
One needs to divorce their thinking that the 4% yield of 2014 is the norm.... Cause its not
I think its going to be extremely difficult for any MLP to be able to sustain a yield lower than 6%...... And those that have lower yields will find themselves up around 6% sooner or later
Broader mkt could still face a significant downside.... S&P 500 currently has a P/E of about 26.... About 100% above historical norms.... US GDP growth is non existant .... Not only is recession probable.... One is over due in historical cycles.... Its not different this time.... The more things change the more they stay the same
Market selloff will take this to its February lows with a possibliity of going below $19
$90 is not rational thought.... That would imply a yield of less than 2%.... And the carnage in the sector would never allow the valuation to go to that level....