Cut MLP risk with quality

Article Excerpt

Cedar Fair and Buckeye Partners are Master Limited Partnerships (MLPs). Investors that hold units in them have similar rights to ownership and dividends as common stockholders in regular corporations. MLPs pay out most of their income to investors, which lets them avoid federal and state income taxes. The IRS treats distributions from MLPs differently than regular dividends, and investors may have to file an extra form with their tax returns. Tight restrictions at the time of formation often prevent MLPs from expanding into unrelated lines of business. This limits their ability to cut risk with diverse revenue streams. That’s why it’s important to focus on high-quality MLPs that have a long history of expanding their sales, cash flow and asset bases, such as Cedar Fair and Buckeye. Buckeye…