Top Investment Options For Investing In MLP and REIT

Published: 21st October 2010
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With the economy showing signs of recovery, you may be considering investing again. At the same time, if you want to explore options other than stocks and mutual funds, you have two options:

1. MLPs or Master Limited Partnerships

2. REITs or Real Estate Investment Trusts

We will explain each of them in detail.

MLP : A MLP is a is a type of limited partnership that is publicly traded. There are two types of partners in this type of partnership - limited partner and general partner. The limited partner is the person or group that provides the capital to the MLP and receives periodic income distributions from the MLP's cash flow, whereas the general partner is the party responsible for managing the MLP's affairs and receives compensation that is linked to the performance of the venture. In order to qualify for an enterprise to issue MLPs, it needs to earn 90% of its profits through activities related to natural resources, real estate or commodities.

A new investment tool that has been introduced recently is the MLP mutual fund. Unlike an equity mutual fund that has a collection of stocks, the MLP fund is a collection of MLPs which the advisors believe will provide adequate long-term capital appreciation through distribution growth and an attractive level of current income. Units for such funds are present for trading on stock exchanges.

REIT : A REIT is the real estate similar of the stock-based mutual fund. It is a company that owns and manages a pool of commercial properties and mortgages and other real estate assets like apartments, office space, etc. Its shares can be traded on a stock exchange. In order to qualify as a REIT in the US, it must fulfill the following conditions:

* pay at least 90% of its annual taxable income to its shareholders

* have at least 100 shareholders

* invest at least 75% of its total assets in real estate

* derive at least 75% of its income from rent or mortgage interest

Here are some of the details about the top picks in each category:


1. National Health Investors - is a health care real estate investment trust that specializes in the financing of health care real estate by first mortgage and by buy and leaseback transactions. It holds $46 million of cash and no debt. The common stock of the company trades on the New York Stock Exchange with the symbol NHI.

2. Annaly Capital Management - manages a portfolio of mortgage-backed securities, and its wholly-owned subsidiaries conduct assets for and deliver services to institutional and individual investors worldwide. It is structured as a REIT for tax purposes and trades under the NLY symbol.

3. Universal Health Realty Income - Trading under the UHT symbol, this is a REIT specializing in healthcare and human service related facilities. Its assets contain acute treatment hospitals, medical office buildings, rehabilitation hospitals, behavioral healthcare facilities, sub-acute care facilities and childcare centers.


1. Enterprise Products Partners - Since its IPO in 1998, it has developed its asset base from $715 million to $28 billion as of June 30, 2010. These include pipelines, storage capacity, offshore hub platforms, fractionation and natural gas processing facilities, marine services and export terminals. Trades under EPD symbol.

2. Kinder Morgan Energy Partners - It is the largest publicly traded pipeline MLP with an enterprise value of more than $30 billion. This includes 37,000 miles of pipelines and 180 terminals. It's also ranked by Fortune as one of America's most admired companies. Trades under KMP symbol.

3. Magellan Midstream Partners - is a MLP formed to own, direct and obtain a diversified portfolio of energy assets. Its current $2 billion asset portfolio includes over 80 petroleum products terminals, a 9,500-mile petroleum products pipeline system and an 1,100-mile ammonia pipeline system. Trades under MMP symbol.

For more information on master limited partnership etf, visit our website.

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