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Author: LAPropDoc Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 8738  
Subject: American Oil Pension? Date: 7/4/2008 8:16 AM
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Hello to this board. I'm a long time Fool but haven't posted here before. I subscribe to a few free investment newsletters to get info on new investment opportunities and came across this the other day. Thought those of you into dividend investing might know something about this.

(it sounded a bit 'too good to be true'...lol)

The writer claims that there are oil companies that pay out 90% of their revenue to shareholders. Supposedly in the 1979 oil crisis the government made a deal where in exchange for exchange for companies signing up for this, their corporate tax would be slash. The author sights Sections 851-855 of the U.S. Internal Revenue Code of 1986.

The author says one of the businesses that has taken advantage of the A.O.P. arrangement is Kinder Morgan Energy Partners (KMP)— a Texas-based oil pipeline company.

http://caps.fool.com/Ticker/KMP.aspx?source=iflsolsnq0000001...

The fool quote says this is a 'master limited partnership' that pays no corporate tax

Dividend was $3.84 or about 7%.

Anyone know about this 'American Oil Pension'?
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Author: HelicalZz Big gold star, 5000 posts Old School Fool Coverage Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4584 of 8738
Subject: Re: American Oil Pension? Date: 7/4/2008 9:22 AM
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LAPropDoc

Here is a good commentary on MLPs.

http://www.dimeoschneider.com/research/documents/EngergyInfr...

They are an attractive asset class for income investors. They are mostly fuel price insensitive, as they are generally in the business of fuel transport, but should prices increase to the point where demand decreases (and we are about there IMO) then transport rates are likely to drop off some.

Zz

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Author: dond261 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4585 of 8738
Subject: Re: American Oil Pension? Date: 7/4/2008 11:40 AM
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There are several investments that have similar rules (90% distributions to avoid taxation at the company level); MLP's, REIT's, BDC's and Royalty Trusts( don't confuse Canadian Royalty trusts with US trusts; they are different).

A good Data Base web site http://wallstreetnewsnetwork.com/ listing these and lots of other things.

I personally like the management of EPD better than KMR.

I did hold KMR, now hold EPD.

Don

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Author: Hohum77 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4586 of 8738
Subject: Re: American Oil Pension? Date: 7/4/2008 12:27 PM
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They are an attractive asset class for income investors. They are mostly fuel price insensitive, as they are generally in the business of fuel transport, but should prices increase to the point where demand decreases (and we are about there IMO) then transport rates are likely to drop off some.

Zz



If its natural gas pipelines, I suspect a big chunk of that revenue shows up in one's utility bill. Even if one is primarily an electricity user, one pays indirectly via transportation, generation or distribution charges, or some other line item in the utility bill.

The link you provided talks about "the ugly"- the tax filing requirements. That's state filing requirements potentially in all the states where the MLP does business. In the KMP case, that's potentially 32-35 states :( Ok, so one hires a professional to do the paperwork, but one still has to write out all those checks or make payment arrangements.



Hohum

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Author: desertdaveataol Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4587 of 8738
Subject: Re: American Oil Pension? Date: 7/4/2008 2:44 PM
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The author says one of the businesses that has taken advantage of the A.O.P. arrangement is Kinder Morgan Energy Partners (KMP)— a Texas-based oil pipeline company.

Go to www.mcdep.com and look up Kinder Morgan (KMP)before you buy any KMP. McDep has nothing good to say about KMP and I've heard nothing good about them either.

Avoid KMP!

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Author: TMFBigFrog Big red star, 1000 posts Old School Fool Home Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4588 of 8738
Subject: Re: American Oil Pension? Date: 7/4/2008 9:30 PM
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desertdaveataol,

Go to www.mcdep.com and look up Kinder Morgan (KMP)before you buy any KMP. McDep has nothing good to say about KMP and I've heard nothing good about them either.

I'm not quite sure what Kurt Wulff's (the analyst at McDep) problems are with Kinder Morgan, but having read some of his reports, it seems like it's personal, rather than dispassionate/analytical/professional. Apparently, it has been going on a LONG time: http://www.mcdep.com/kmpinstreet20917.htm (that's from September, 2002)...

Unfortunately, his irrational and perpetual hatred for Kinder Morgan has more or less made me question pretty much anything else he writes. That's unfortunate, because I'm sure he knows more about the industry than I do and probably has a lot of good information...

Disclosure: At the time I wrote this post, I owned shares of Kinder Morgan Management (KMR), a related company to Kinder Morgan Energy Partners.

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Author: grungeboater Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4589 of 8738
Subject: Re: American Oil Pension? Date: 7/4/2008 10:25 PM
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FWIW KMP was founded by ex-Enron executives who bought Enron pipeline assets for pennies on the dollar. So, perhaps some people equate this business with sleazy business ethics. That is what Ive read and I make no judgement here but I own a number of alternatives to KMP including ETP, APL and EPD.

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Author: LAPropDoc Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4600 of 8738
Subject: Re: American Oil Pension? Date: 7/6/2008 1:15 PM
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Here is a good commentary on MLPs.
http://www.dimeoschneider.com/research/documents/EngergyInfr...


Nice link, thanks.

The link you provided talks about "the ugly"- the tax filing requirements. That's state filing requirements potentially in all the states where the MLP does business.

Yes, that would be a chore but later in that report they talk about 'Close End MLP Funds'. Basically mutual funds which invest just in MLPs.

"For investors who own MLP closed-end fund shares in IRAs or other tax qualified accounts, taxes are a non-issue (and UBTI is avoided). However, for those who own the closed-end funds outside a tax qualified account, there are some additional potential tax benefits as compared to owning the MLP units outright. For one, the vast majority of the income paid out to investors is considered a “non-dividend distribution” and is not taxable."

So that would get by the headache of tax filing in multiple states. (I think)

I like how they appear to have a low correlation with other types of investments, helping to diversify a portfolio AND seem to somewhat buffered from rise and fall in energy prices. Though they might be affected by lower demand for fuel, since the MLPs bulk of income is on the quantity of product that flows thru their pipelines.

Might be worth further research.

Thanks

doc

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Author: IcyWolf Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4601 of 8738
Subject: Re: American Oil Pension? Date: 7/6/2008 2:41 PM
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Hi DesD,

You may be right about KinderM today,especially if you are counseling caution vs agreeing with the cited critics .... but your cited critics there ... well ... since even a broken watch is right twice a day they may yet be right <g> ....

But whether we look at a 2 yr SharpChart or a decade Bigchart we see KMP with prounced uptrends in price AND a very nice uptrend in rolling divvies. And all the while with short activity bounciong around in the .5 to 2% range (my red flags go up as shorts approach 10%). So If I were an expert and had missed a decade of growing divvies and stock prices I too might be upset <smile> .... then again maybe this lil ole furry 4 footer is just like your KMP critics ... personally biased ... ya see for dumb reasons (personal DD, divvies amd and momentum considerations) I did buy them quite afew years back and still hold a bit.

http://stockcharts.com/h-sc/ui?s=kmp&p=D&yr=2&mn=0&dy=0&id=p...

http://bigcharts.marketwatch.com/advchart/frames/frames.asp?...

C'est la vie ...
Take care & Happy belated 4th to all herabouts ...
IcyWolf

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Author: desertdaveataol Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4602 of 8738
Subject: Re: American Oil Pension? Date: 7/6/2008 4:45 PM
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You may be right about KinderM today,especially if you are counseling caution...

Icy, I can't really debate this because when I went looking for the piece I'd read about a year ago I couldn't find it. Thus the post you responded to.

IIRC McDep's concerns with Kinder don't involve their ability to earn money, but rather their willingness to pass profits on to investors in a fair way. It seems (again iirc) that there's something about the deal which allows Kinder to screw their investors and (it seems) they have done so at least one time in the past. I believe McDep's animosity toward Kinder stems from that long ago action. I mean, you'd be mad too if your customers bought stock on your advice and got screwed. I could be all wrong about this.

As for myself, a guy who charges $6,000 to $24,000 for advice and is still in business after all these years is someone I listen to. I've found alternatives to Kinder.

Desert (owns TRP & BPL) Dave

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Author: lowrisktaker Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4603 of 8738
Subject: Re: American Oil Pension? Date: 7/7/2008 12:05 AM
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http://stockcharts.com/charts/gallery.html?BPL

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Author: IcyWolf Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4604 of 8738
Subject: Re: American Oil Pension? Date: 7/7/2008 9:52 AM
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Thanks for your response Des Dave,

And yep, you are right in that all sorts of folks need to be read / listened to, least we hear only echoes of our own biased views. Thanks for reminding me and doing so with style ...

MLPs, BDCs, Preferreds from Banks, etc. etc. ... so many interesting things to learn more about and maybe even garner a few farthings of profits from <smile> ...

Take care,
IcyWolf

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