3 MLP Picks with High Yields and New Deal Backlogs

Master limited partnerships (MLPs) have had a rough time since about mid-May.

Along with all yield-oriented securities, theyve been buffeted by rising interest rates.

Volatile oil prices and a major spill from one of the biggest companies in the index

havnt helped. The benchmark Alerian MLP Index is down about 6% in the past

month.

But the downturn, partly seasonal, may be an opportunity to buy some of the

strongest companies at a lower price. Rob Thummel, portfolio manager at energy

investment firm Tortoise Capital Advisors, which operates the closed-end

fund Tortoise Energy Infrastructure (TYG), came by Barrons earlier this week to tell

us about some of the firms top MLP holdings.

Tortoise likes the following MLPs for their strong management, current yields between

nearly 4% and 6% and backlogs of new projects a good sign for future distribution

growth. Theres still a lot of need for improved energy infrastructure, Thummel says.

Plains All American Pipeline (PAA) has a 6% yield and a record backlog of projects, says Thummel. Despite the May 19 California oil spill, Management has a history of operating its assets safely, he says. Thursday, Plains filed an 8-k that estimates the clean up costs through June 9 at $65 million, or $3 million a day. The company says it cant estimate total costs but it expects insurance will kick in. Thummel says it shouldnt be material to the companys financials.

Magellan Midstream Partners (MMP) has a 3.6% yield and operates crude and petroleum product pipelines and storage facilities. It claims to own the longest refined petroleum products pipeline system in the country. It also has a strong backlog of new projects, says Thummel. On May 18, the firm promoted Aaron Milford to be its new chief financial officer.

Enterprise Products Partners (EPD) has a 4.7% yield. It is the largest MLP, making up nearly 17% of the index, and is involved in many areas of energy infrastructure. It recently announced a deal to acquire natural gas pipelines and gathering plants from Pioneer Natural Resources (PXD) and Reliance Industries for $2.15 billion.

Tortoise operates five closed-end funds. While TYG is trading at a discount to net

asset value of 6.5%, the other funds have larger discounts. Tortoise Pipeline and

Energy Fund (TTP), for example, has a 13.7% discount and a 6.8% yield.