The dividend paying stocks I would like to profile today have been on my radar screen for quite some time. Enterprise Products Partners L.P. is organized as a Master Limited Partnership (MLP). However, before I present the profile, I would like to discuss briefly what a Master Limited Partnership is and how it works.
Simply put, an MLP is a publicly traded limited partnership. An investor purchases shares of ownership which are referred to as units, similar to owning shares of stock in a company. Once you own units in an MLP you are considered a unitholder (partner).
MLP’s are not subject to corporate income tax as long as they pass through 90% of their income to their partners. Partners receive an IRS Schedule K-1 from the master limited partnership for dividend income received and are taxed at the unitholder level. If you are unfamiliar with MLP’s, take some time to do some research before investing. MLP’s can pay a portion of their dividend income in the form of unrelated business taxable income (UBTI). This can cause a problem if you hold an MLP in a tax-deferred account and collect more than $1000 in UBTI. For this reason, MLP’s are best held in a taxable brokerage account.
Enterprise Products Partners LP (NYSE: EPD)
Business: Energy MLP Annual Dividend: $2.39 Yield: 5.57%
Payment Frequency: Quarterly Recent Price: $44.15
Enterprise Products Partners L.P. is an energy sector MLP based out of Houston Texas. EPD is the largest publicly traded energy partnership in the nation and is a leading provider of energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, refined products and petrochemicals. Since it’s initial public offering in July of 1998, EPD has grown it’s asset base from $715 million to $31 billion by December of 2010. The asset base is broad and diverse. Here are just a few of their assets…