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Dan Dicker

Dan Dicker

Dan Dicker is a 25 year veteran of the New York Mercantile Exchange where he traded crude oil, natural gas, unleaded gasoline and heating oil…

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Time to Rebalance your MLP Portfolio

Interest rate volatility has made the dividend-paying stocks a minefield in the last several weeks and likely to continue to make them difficult investments to hold.  In the energy space, no subsector has been more sensitive to volatile interest rate fluctuations than the master limited partnerships (MLP's).

Virtually every stock in this subsector has taken a varying degree of pain from the recent sell-off in stocks, mostly on the back of the spike in the 10-year treasury rate, now over 2%.  But pensioners and many wealthy investors rely strongly upon these dividend (distribution) paying holdings. Although the group is likely to remain volatile and more sensitive to market fluctuations, there are better and worse MLP's to focus your investment dollar upon and now is a good time to rebalance your MLP portfolio to reflect this new market sensitivity. 

The more traditional MLP's, whose portfolios overwhelmingly include pipelines, remain the least volatile and more 'safe' as these are not as leveraged to the underlying commodity price and therefore represent less ultimate risk in a volatile rate world.  These pipeline MLP's, including Enbridge (EEP), Enterprise (ETP), Kinder Morgan (KMP) and Plains All-American (PAA) are also, not surprisingly, the lowest percentage distribution payers. 

Other MLP's, more influenced by commodity prices, are far more sensitive to market fluctuations even if the commodity price remains relatively steady…

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