Investing in Acronyms Pays Big Dividends

• By the tickerspy.com Staff
• On 11:27 am EST, Tuesday November 10, 2009

Here are some companies that would rather pay you than pay taxes.

Ever wonder why there are so many abbreviated Indexes on top of tickerspy's average yield rankings? For many, the answer is a special structure that allows the components to pay out the majority of their cash flows to investors in lieu of corporate taxes. These "pass-through entities" are great investments for long-term investors looking to collect big dividends.

Master limited partnerships (MLPs) are largely energy-related, although they normally don't swing wildly in relation to commodity prices. A chart of the MLPs Index's performance in 2009 shows that its components mostly trade in tandem with the S&P 500.

Unlike the S&P 500, however, MLPs pay out an average 7.8% dividend yield. As of the most recent 13F filings, the latest of which are starting to come in ahead of the mid-November deadline, Enterprise Products Partners (NYSE: EPD - News), Plains All American Pipeline (NYSE: PAA - News), and Magellan Midstream Partners (NYSE: MMP - News) were all favorites among Pro investors.

In the last month, Nasdaq-listed MLPs have outperformed their peers. However, recent high-flyers like Hiland Partners (NASDAQ: HLND - News) and Crosstex Energy (NASDAQ: XTEX - News) stopped paying dividends in early 2009.

Real estate investment trusts (REITs) are another place to earn big dividends. These companies allow for individual investors to diversify their real estate holdings without being forced to buy multiple properties. They also benefit from a pass-through structure, which puts three REIT sub-sectors in tickerspy's top-10 yielding Indexes.

Components of the Healthcare REITs Index pay an average 6.9% dividend to shareholders. Popular plays within the group include HCP (NYSE: HCP - News), Ventas (NYSE: VTR - News), and Health Care REIT (NYSE: HCN - News). All three were among the top U.S.-listed equity holdings of 19 or more Pros as of the most recent SEC filings.

Retail REITs like Realty Income Corp. (NYSE: O - News) and Northstar Realty Finance (NYSE: NRF - News) pay out approximately 7% and 12% dividends respectively.

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