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Frequent Contributor

EPD and MMP

Prices for these MLPs seem to have stabilized, more or less. I have a slug of each for tax deferred income. Yielding 6-6.5%.

The old M* forums had many threads on MLPs, particularly these.

Any harm if I just hold these forever? I’m looking for places to add money ... would these be reasonable buys as an alternative to bonds which have run up furiously in the last year?

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24 Replies
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Participant ○

Re: EPD and MMP

 

I plan to hold my large (and growing more) position in EPD forever, or as long as they keep being run in a responsible manner.

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Explorer ○

Re: EPD and MMP

 

 holding period is forever for me. If I was buying I’d favor epd 

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Explorer ○

Re: EPD and MMP

Love EDP and use their dividend reinvestment plan for a 5% kicker.

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Frequent Contributor

Re: EPD and MMP


@Drewg wrote:

Love EDP and use their dividend reinvestment plan for a 5% kicker.


If I’m not mistaken, they reduced the DRIP discount to 2.5% a year or two back, right?

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Follower ○○○

Re: EPD and MMP

I have simplified my MLP holdings to just MMP and EPD.

I would say that MMP is more undervalued right now, so I have added more of MMP over EPD recently.

My holdings of MMP > EPD.

I plan on holding them long term.

Eventually, I may stop reinvesting my distributions, and it'll be a tidy sum for my quarterly cash flow.

 

 

 

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Frequent Contributor

Re: EPD and MMP

I own EPD and MMP in roughly a 2:1 ratio. I am only reluctant to add to EPD because of single-issue risk. I don’t want to much $$ in a single stock. (I would place no such limit on a fund.)

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Participant ○○○

Re: EPD and MMP

Chang, 14+ years ago, I asked myself the same questions about bonds and 'forever' kind of investments.  I invested in Magellan and Enterprise on the same day, along with a few other outfits.  I liked the companies, I loved the business and the investment vehicles suited my situation.

Since then, the MMP distribution is 4.2 times greater and its market value is 4.1 times greater.  EPD's distribution is 2.4 times greater and its market value is 2.3 times greater.

Bonds obviously don't act like that.

I have never regretted my long ago decision and have never sold any of either.  In fact, I've added to both and reinvested distys along the way.  I doubt I will ever sell any of these two.

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Frequent Contributor

Re: EPD and MMP

Thanks Cliff. It’s good to hear an experienced opinion.
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Follower ○○○

Re: EPD and MMP

I added twice a many $ to MMP as EPD back in December 2018.

EPD pos3 at 4.6% avg holding 9 years, very large cap gain, 13.24% Yield on invested $.

MMP pos14 at 2.9% avg holding <3 years, minimal cap gain, 6.46% yield on invested $.

MMP is growing their distribution faster than EPD, I'm inclined to add to MMP, but will add to both at the right prices.

No intention of ever selling either.

John

 

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Explorer ○

Re: EPD and MMP

+1 on cliff's & jokingme responses - strength of the 2 choices and a forever holding period.  I would favor new $ in MMP right now over EPD - was the opposite a few years back with EPD over MMP for new $.

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Participant ○○○

Re: EPD and MMP

Chang, your 'forever' question got me to thinking about what a real total return is to an investor who does indeed hold something forever.  Obviously, the only real return in that situation is the cash dividend or distribution.  (Yeah, you can call an unrealized loss or gain as part of some computed paper return, but you can't turn that into a Whopper when you really need a Whopper.)

I'm sure you noticed that the distribution increases for MMP and EPD over 14+ years are almost identical to the increases in market value.  That means their current yield today is the same as it was back then.  And that the market has decided that growth in cash distributions is rewarded by growth in market price.

For giggles, I went back and looked at the 57 quarters (14 years plus 1 quarter) that MMP has sent me cash, the only real return I will likely ever get on this investment. . On an initial investment of about $15, MMP has paid me $30.83.  The current $4.04 annual payout is approaching 30% of the original investment.

Most of my investments behave in a similar manner, but usually with not quite so much a return.  This explains why I hardly ever look at daily market prices and often forget the password to my brokerage account.  The more time that goes by, the less I care about the actual market price of something I own.

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Frequent Contributor

Re: EPD and MMP

Thanks all. I might add a little to MMP this week.

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Participant ○○○

Re: EPD and MMP

Chang, this may not be of benefit to you, but to anybody thinking of buying MLPs:

Benefit:

  1. Distributions currently run about 6% and there is a potential for capital appreciation (and risk of depreciation).
  2. Tax deferred income in a taxable account, that may transition to tax free (based upon a bump up in basis) when you die. You’re not going to get 6% return with a muni bond so this is better.

Detriment:

K-1 form complicates your taxes

  • If you already have your taxes done by a CPA who has expertise in handling MLPs you’re not going to feel much effect.
  • If you do your own taxes - in my case in TurboTax, when I sold SEP in 2018, it doesn’t fully cover this area and you have to use work arounds.

The Trump tax cut did provide some new tax benefits for partnership owners (such as himself). But the whole thing is just too complicated for anyone who is not an expert in this area. From what I’ve read, if you own MLPs you can’t just go to any CPA, you have to go to one who has expertise in this area. Also, there are potentially going to be new tax changes in this area.

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Frequent Contributor

Re: EPD and MMP

I use a tax preparer, so the K-1s don’t bother me.

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Frequent Contributor

Re: EPD and MMP

Richard posted in the BSW thread:


@richardsok wrote:

MLPs may have bottomed. (Or maybe not.)


Wondering Richard if you hold any individual names, and if so how you view EPD and MMP. I haven't added (or sold) my holdings in at least two years, just reinvesting dividends. I have a lot of cash stored up in MM. Still wondering whether to add to them.

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Frequent Contributor

Re: EPD and MMP

@ElLoboWhat is your take on KMI, MMP and EPD at this time?I know this is your bailiwick and I am out of my depth here.

Can they maintain their dividend? Are they candidates for bankruptcy? Are these amazing levels to buy or some sort of trap?

Anyone else?

MMP 14.53% yield

KMI 9.23%

EPD 15.12%

 

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Follower ○○○

Re: EPD and MMP

Unfortunately, a blood bath with both EPD and MMP.

I am holding them for the income, and consider them both excellent companies
to hold for long term.

The whole market is down, so I am not selling.

Most likely, further drops will occur.

Definitely the current price is great for long term value, but don't have
any way to predict when the floor will be hit.

I'd hold my cash longer, but as you know, getting back in is just as
unpredictable as selling out.



Good luck,

Gary
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Frequent Contributor

Re: EPD and MMP

Thank you Gary. I am buying for long term and future income in my 401K. Just bought KMI and EPD. I will buy in tranches as things play out. My theory is that Putin and Saudi eventually decide that $20 bbl oil is not in their best interest.

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Follower ○○○

Re: EPD and MMP

I'd love to buy more of EPD, MMP and KMI, but I'm too petrified for rational thought.

At least O raised its dividend again by $.0005/share/month.   

John

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