Dividend Investing KMP Master Limited Partnership

Dividend Investing  KMP or inside ya Ira KMR

So many investments to consider, so little time --- I stumbled across this gem recently (this morning).
From Kinder Morgan’s company website:

“Kinder Morgan owns or operates approximately 37,000 miles of pipelines and 180 terminals in North America. Our companies include Kinder Morgan Energy Partners, L.P. (NYSE: KMP), Kinder Morgan Management, LLC (NYSE: KMR) and Kinder Morgan, Inc., a private company which owns the general partner of KMP.

Kinder Morgan has a large footprint of diversified and strategically located assets, and we are a market leader in most of our businesses. For example, in North America, we are:

• The largest independent transporter of refined petroleum products
• One of the largest natural gas transporters and storage operators
• The largest independent terminal operator
• The largest transporter and marketer of CO2
• The largest handler of petroleum coke

Almost all of our assets are owned by Kinder Morgan Energy Partners (NYSE: KMP), the largest publicly traded pipeline master limited partnership with an enterprise value of more than $30 billion. KMP is comprised of five business segments – Natural Gas Pipelines, Products Pipelines, CO2, Terminals and Kinder Morgan Canada.

We have been executing the same strategy since 1997. Our business model is simple. We own, operate, expand, build and acquire primarily midstream energy assets that provide a return substantially in excess of our capital costs, and then we distribute that excess to our limited partners and general partner.

We have minimal exposure to commodity price volatility because we typically don’t own the energy products that we transport, store or handle. As a result, our businesses are relatively stable and our fee-based assets have consistently generated superb cash flow in all types of market conditions. Where we do own the commodity, such as in our CO2 business, we hedge to lessen the impact of price swings.

Our business model has worked well and KMP has delivered a compound average annual return of 25 percent to unitholders over the past 12 years. In addition to delivering value to our unitholders, our focus is on operating our assets safely to protect the public and the environment. We spend millions of dollars each year on integrity management programs and maintenance to operate our assets safely.

At Kinder Morgan, we pride ourselves on being a different kind of energy company. What makes us different?

It starts at the top with Chairman and CEO Richard D. Kinder, who earns a salary of $1 per year and does not receive a bonus, stock options or restricted stock grants.  As a shareholder/unitholder, Kinder’s financial rewards are directly aligned with the company’s investors – if the company does well, he does well.

We also eliminate unnecessary overhead expenses such as corporate aircraft, sponsorships, sports tickets and executive perks. In addition, we cap senior executives’ base salaries far below industry standards. Their financial incentives, such as bonuses, are tied directly to the performance of the company and their own personal performances.

Kinder Morgan has been conducting its business transparently long before it became a corporate buzz word. To our knowledge, we are the only S&P 500 company that publishes its annual budget on its web site, which enables investors and others to follow our progress throughout the year. We also post our environmental, health and safety (EHS) performance on our web site. KMP continues to outperform the industry averages in most EHS categories.

Kinder Morgan does not have a Political Action Committee (PAC), nor do we make any political contributions. Any political contributions made by executives or employees are made individually as private citizens with their own personal money. KMR is a limited partner in and manages and controls the business and affairs of KMP. KMR has no properties and its success is dependent upon its operation and management of KMP and KMP's resulting performance.

KMI owns the general partner and limited partner units in KMP. KMI also owns 20 percent of and operates Natural Gas Pipeline Company of America (NGPL), which serves the high-demand Chicago market.

Kinder Morgan has approximately 8,000 employees.”   www.kne.com

Holy cow is this company for real!  Lets see if they put their money where their mouth is.  The stock is trading at $72.47 and has been upward trending since 2009.  52 week low was at around $63.  They have also increased the quarterly dividend from $1.07 to $1.13 in the past year.  KMR has a solid history of dividend increases.  Not only that but their net profit margin is 15.38%.

Current dividend yield is 6.24%.  I don’t see any downside to owning this stock.  Pipelines wear out and need upgrading and replacement over the years but they are actively accomplishing this too.  Put this in my “THUMBS UP” category.

Disclaimer I plan to purchase KMR down the road.

MLP ETFs: A Fixed-Income Alternative

Are you looking for a stable and relatively high yield fixed-income asset? Then you may want to take a gander at master limited partnerships (MLPs) exchange traded funds (ETFs), which have only recently come to market.

If you’re unfamiliar with this sector, here’s the short of it: MLPs are a great way to play the energy industry with the added benefit of regular dividend payouts and investment appreciation.
Wells Fargo Senior Energy MLP Analyst Michael Blum believes that MLPs still have plenty of potential, with strong business fundamentals, distribution growth and attractive yields, writes Brian Sylvestor for Investor Ideas.

Those are the basics. Now here’s what you really need to know about this sector that’s more than likely new to you:

• There are different kinds of MLPs. Exploration and production (E&P) MLPs plays produce oil and natural while gather and processing (G&P) MLPs deal in extracted natural gas liquids (NGLs). G&P MLPs benefit from rising oil prices and low natural gas prices.
• Around 80% of distributions received from MLPs will be tax deferred until the asset is sold. MLPs are also equities, which means there is an upside in the price. Additionally, MLP distributions may change. Blum forecasts a 5% medium distribution growth for the MLP sector over the next couple of years.
• MLPs are slightly sensitive to interest rate changes – a spike in interest rates will cause MLPs to underperform, so watch for any hints of Federal Reserve action on that front. MLPs are also correlated to commodity prices, with a higher correlation toward rising crude oil – certainly an advantageous situation these days.
• Short-term bursts won’t affect MLPs too much because they operate based on volume of oil or natural gas shipped, which provide investors with predictable and stable cash flows, reports Jim Fink for Investing Daily.
• MLPs pay taxes at the partner, or unitholder, level and most of their income flow to their partners in the business, says Christine Benz for Morningstar. By gaining this tax status, MLPs must provide 90% of their income from “qualified sources,” or producing, processing, and transporting energy.
• Since MLP payouts aren’t dividends, investors report income on a K-1 form, as you would with futures-based ETFs.

Now, let’s get into a few of the ETFs and exchange traded notes (ETNs):

• Alerian MLP ETF  (NYSEArca: AMLP): AMLP launched last September, and it’s the first MLP ETF. Until this fund came along, MLP access could only be had in ETNs. It delivers a nice yield (currently close to 6%), though its performance has been flat since launch. This fund is diversified across three primary MLPs: petroleum transportation, natural gas pipelines and gathering and processing.
• Credit Suisse Cushing 30 MLP Index (NYSEArca: MLPN): MLPN owns 30 companies involved in the energy infrastructure market. Each holding in the fund starts off with a 3.33% weighting after rebalancing quarterly, making it a more equally-weighted fund instead of the more common route of cap-weighting.
• UBS E-TRACS Alerian Natural Gas MLP ETN (NYSEArca: MLPG): MLPG also appeared on the market in March 2010. It has a current yield of 6.23%. Its top 10 components range between 9.7% of the total portfolio (in the case of Enterprise Products Partners) down to 4.4% (in the case of MarkWest Energy Partners).
• JPMorgan Alerian MLP Index ETN (NYSEArca: AMJ): AMJ has a current yield of 5.04%. It’s a tad more concentrated than other MLP funds, however; the top two constituents account for more than 25% of the fund. If concentration is a concern for you, then you might be better off with an equally-weighted fund, or one that simply has its holdings spread out a little more.

Disclosure I am Long AMJ shares. 

Alerian MLP Index Concludes Stellar Decade

In the last decade (January 1, 2001 to December 31, 2010), the MLPs had one of the best gains ever for any industry group. Below are the beginning and ending values for the Alerian MLP Index along with the previous record reached in 2007.

Date -- AMZ -- AMZX - Yield
12/31/00 - 131 - 191 - 8.8%
07/13/07 - 342 - 750 - 5.4%
12/31/10 - 363 - 1026 - 6.2%

The Alerian MLP Index, AMZ, almost tripled, very impressive considering how many quality companies had little or even negative appreciation in this decade. Dividend Aristocrats (with a minimum history of 25 years of annual increased dividends) such as General Electric (PFE) and Bank of America (BAC) reduced dividends during the recession, resulting in their removal from this elite group. AMZX, the comparable index including reinvested income, had a superb performance, rising more than five times the original value, with an equivalent compounded annual growth rate of more than 18%.

An alternative measure of performance is to begin with the record value reached in July 2007 (what turned out to signal the first wave of the financial market meltdown). The index is up 21 (6%) while the index including reinvested income rose 37% (equivalent to a compounded annual growth rate of 13%). Gold is one of only a few investments with higher growth rates since then.

The business model of MLPs has remained intact during the financial meltdown and recovery. Funds were raised to finance expansion of pipelines and other fixed assets while many companies had difficulty securing financing.

In 2009, a number of closed end funds and mutual funds were started to track MLP indices or concentrate on MLP investments. They give an averaging effect for the investor but do not have tax hassle (and lack tax benefits) associated with owning MLP units. AMJ is one of the oldest tracking funds (almost two years old). For AMJ, 10 shares approximate the value of AMZ with a current yield of almost 5%. Dividends are paid from distributions received net of fund expenses. There are a number of tracking funds but one, MLPL, needs to be singled out for its high risk. This fund's goal is to double the yield and capital appreciation (capital losses are also doubled). But added potential gains bring added risks. Doubler funds have poor records of tracking their base funds over the long term. In addition higher interest rates on borrowed funds, used to achieve doubler effects, will reduce net income for MLPL.

There are other ways to participate in MLP growth by purchasing shares in corporations. Kinder Morgan (KMR) and Enbridge Energy (EEQ) are stocks created by these MLPs. Shares track the comparable unit prices and pay stock dividends based on the distributions to the respective units, making them very tax efficient.

The rapid rise for MLPs in the last two years could cause them to run into headwinds in 2011. Higher values bring lower yields. The yield on the index has fallen to 6.2%, the lower region in its 15 year history. MLPs remain yield investments and low yields suggest topping in market prices. In the last two months the index was sluggish after reaching new record levels, while Treasury rates rose sharply (1 percentage point for the yield on the 10 year Treasury bond).

The long term outlook for the industry remains excellent, but it will be difficult to replicate the performance of the last decade. Growth rates could slow. Derived investment income from the index has risen at an annual rate of 5½% in the last three years which may be representative of the rate going forward, implying investment income of 38.50 in 2020. Today's low yield of 6.2% projects an ending value of 620 for the index, a 71% gain in this decade. Different assumptions will change the ending value, but it's logical to assume that the growth rate of income will slow for a more mature industry. Existing unit holders ought to be happy with this growth but new investors should be prepared for slower growth of distributions and higher yields which would further limit growth of unit prices (and the index).

Disclosure I am long GE, PFE and AMJ.

Are ETNs Finally Coming Of Age?

The success of a number of exchange-traded notes this year, including two that canvass the market of VIX volatility futures and others offering investors exposure to master limited partnerships, is raising the question of whether ETNs are about to truly take off and become part of every investor’s portfolio.

ETNs, unlike ETFs, offer investors direct exposure to an underlying index, minus expenses. They don’t own underlying baskets of securities like ETFs do, which not only eliminates tracking error but also gives ETNs access to parts of the investment universe that are hard to cover.

The catch -- and it’s been a big one since the market crash of 2008, 2009 -- is that ETNs are unsecured credit obligations backed only by the faith and good credit of their issuers. If an issuer goes under, investors essentially forfeit their entire investment. That chance seemed very remote when ETNs first launched in 2006, and perhaps it’s fading today. Some issuers say investors are getting over fears and are now curious about ETN attributes, including tax advantages.

“I am very confident that we’re going through what I’m calling ‘The Big Thaw’ when it comes to exchange-traded notes, and I think it started with the VIX products that iPath brought,” Bryon Lake, senior product strategy manager at Wheaton, Ill.-based Invesco PowerShares, said in a telephone interview. “We’re getting more questions and more feedback from investors that are looking for and comfortable with the exchange-traded note.”

ETNs represent about $14.5 billion out of the $1 trillion invested in exchange-traded vehicles, according to data compiled by IndexUniverse.com. And, inflows are building momentum:$1.21 billion in 2008; $4.18 billion in 2009 and almost $6 billion in 2010. Moreover, while ETN assets are less than 1.5 percent of total assets in exchange-traded products, the number of ETNs on the market is 131, or almost 12 percent of the 1,101 ETPs now listed in the U.S.

"It's clear that 2010 was the year of the ETN," said Keith Styrcula, chairman and founder of the Structured Products Association, a New York-based trade group with its finger on the pulse of developments in the world of ETNs. "With the proliferation of new issues and new issuers, the ETN came into its own as a liquid, tax-efficient investment vehicle," Styrcula added.

Top Gainers ($, Millions)	2010's Most Popular ETNs as of Dec. 29
Ticker	Name	Issuer	Flows	AUM ($, M)	Turnover
VXX	iPath S&P 500 VIX Short-Term Futures ETN	Barclays Capital	2,591.07	1,692.04	119,135.19
AMJ	JPMorgan Alerian MLP ETN	JPMorgan Chase	1,229.85	2,255.00	6,148.97
VXZ	iPath S&P 500 VIX Mid-Term Futures ETN	Barclays Capital	700.23	695.89	7,977.51
DJP	iPath Dow Jones-UBS Commodity Total Return ETN	Barclays Capital	322.65	2,822.92	3,995.61
MLPI	UBS E-TRACS Alerian MLP Infrastructure ETN	UBS	180.51	194.27	243.62
RJI	ELEMENTS Rogers International Commodity - Total Return ETN	ELEMENTS	141.84	662.92	872.68
MLPN	Credit Suisse Cushing 30 MLP	Credit Suisse	94.13	121.30	377.98
RJA	ELEMENTS Rogers International Commodity - Agriculture Total Return ETN	ELEMENTS	90.57	517.06	890.05
UCI	UBS E-TRACS CMCI Total Return ETN	UBS	81.81	129.99	54.94
JJG	iPath Dow Jones UBS Grains Sub Total Return ETN	Barclays Capital	80.59	188.89	973.92

VIX, MLPs, Commodities and Beyond

Much of the recent growth in ETN assets has centered on a few products, notably the iPath S&P 500 VIX Short-Term Futures ETN (NYSEArca:VXX - News) and the iPath S&P 500 VIX Mid-Term Futures ETN (NYSEArca:VXZ - News). The two products now have $1.69 billion and $696 million in assets, respectively. The notes are designed to provide proxy exposure to the CBOE Volatility Index, or VIX, by reflecting the returns of short- and intermediate-term futures on the VIX index. Investors have been attracted to them as a potential hedge against unexpected market turbulence.
“ETNs allow you to track the more esoteric asset classes that would be tougher to do with an ETF, like the VIX, said Rick Romey, president of of ETF Portfolio Solutions, a Kansas-based Registered Investment Advisor. Romey added that his firm has not yet embraced ETNs, in part because of credit-related concerns.

The other big relative newcomer is the JPMorgan Alerian MLP Index ETN (NYSEArca:AMJ - News), a first-to-market exchange-traded note launched originally by Bear Stearns. After treading water for a few years, AMJ has caught on, pulling in more than $1 billion in new cash flow in the past year. It now has $2.26 billion in assets. Investors are attracted to AMJ for its yield, currently around 5 percent. ETNs are a slick vehicle for providing exposure to MLPs, which are nearly impossible to package into a tax-efficient mutual fund or ETF structure.

The third leg of ETN assets is in commodities, an area that includes the oldest and biggest ETN of all, the $2.82 billion iPath Dow Jones-UBS Commodity Total Return ETN (NYSEArca:DJP - News). DJP launched in 2006.

iPath has a broad family of futures-based commodity-related ETNs, which the company says gives investors the ability to play the emerging markets-related commodities boom of the past 10 years in a variety of ways.

“At different times, different commodities become interesting to people,” Tim Edwards, a New York-based iPath product development vice president, told IndexUniverse.com. “Right now, copper is one of them.”

The iPath Dow Jones-UBS Copper Sub Total Return ETN (NYSEArca:JJC - News) has returned about 25 percent this year and 43 percent in the past six months; it is currently the only ETP providing exposure specifically to copper. Two ETFs, the First Trust ISE Global Copper Index Fund (NYSEArca: CU) and the Global X Copper Miners ETF (NYSEArca:COPX - News) own companies that mine copper, though the companies held by the ETFs aren't necessarily exclusively focused on the mining of copper.

The iPath family of ETN also includes securities that allow investors to get exposure to currencies and to position their portfolios for changing interest rates.

Different Tax Treatment

Invesco PowerShares has built on the success of its commodities ETF franchise (including the $5 billion PowerShares DB Commodity Tracking ETF (NYSEArca:DBC - News)) and now offers investors the option of gaining similar exposure in an ETN wrapper. DBC’s ETN counterpart, the PowerShares DB Commodity Long ETN (NYSEArca:DPU - News), had gathered $6.7 million as of Dec. 29.

Apart from the broad-based DPU, the company has replicated ETF strategies using ETNs in four other commodity markets:oil, base metals, agriculture and gold. PowerShares has extended the market on the ETN side with short ETNs and ETNs offering double-exposure long and short.

“The ETN structure provides us some flexibility in order to access markets that may be more difficult to access through the ETF vehicle,” Bryon Lake, the PowerShares executive said. “For example, our double-long and double-short gold ETNs -- (NYSEArca:DGP - News) and (NYSEArca:DZZ - News) -- have seen significant uptick in activity and assets due to all the attention gold has been getting for the last year or so,” Lake said.

There are also potential tax advantages to owning ETNs, which, for commodity ETNs under prevailing IRS interpretations, are taxed like zero-coupon bonds. That means investors don’t owe tax on the note until they sell, the note gets called (if it’s callable), or the note matures. Commodity ETF investors have their positions marked-to-market each year, creating an annual tax bill. ETN investors also have to fill out 1099 tax forms, as opposed to the K1 forms reserved for investors in futures. That’s true even for ETN investors with futures-based holdings.

“We hear from some investors that they would prefer to not get K1s,” said Lake. “And they can generally get the same exposure through ETN vehicles that may offer them a different tax treatment.”

Lingering Doubts

Currently, the biggest issuers of ETNs are firms that thrived during the near-collapse of the financial system in September 2008. Indeed, companies such as iPath ETN issuer Barclays; J.P. Morgan, the company behind the MLP exchange-traded note “AMJ;” and Deutsche Bank, the sponsor of the ETNs marketed by PowerShares, all took advantage of the turmoil their rivals barely survived.
“The market crash got rid of a lot of players in the marketplace. So those who were left standing like Barclays who had the creditworthiness, could then grab a bigger market share,” said Richard Keary, president of Global ETF Advisors LLC, a New York-based firm that helps companies bring exchange-traded products to market.

Recently, however, that has changed. Citigroup recently launched the volatility-related C-Tracks Exchange-Traded Notes Based on the Performance of the Citi Volatility Index (NYSEArca:CVOL - News). The note has attracted $13.8 million in assets since its rollout in mid-November. A slew of other firms are also jumping into the ETN arena, among them Credit Suisse, UBS, the Royal Bank of Scotland as well as a firm called VelocityShares that was formed in part by an executive who helped launch iPath's ETNs
What could that mean? Are investors so complacent that firms, such as CitiGroup or RBS, formerly on life-support can now issue debt products and attract attention? Or have Citi and RBS turned the corner and now is seen as trustworthy? Or, mostly likely, do investors see these as trading products designed for one- or two-day moves, and not as long-haul investments where the credit risk most matters.

Maybe that’s the secret of the ETN rebirth:the notes have focused on providing trading tools rather than long-term investments, reducing the likelihood that investors will be caught in a failed situation.
The uncertainty brings the discussion full circle back to the credit risk implicit in any ETN. After all, three ETN backed by Lehman Brothers closed in September 2008 after the firm declared bankruptcy, and any investor who held to the bitter end lost out.

“I know it’s a long shot,” said Rick Romey, the Kansas-based financial advisor. “The odds of a company going out of business and the ETN holders being left holding the bag is very small probability. But in the last couple of years, we’ve seen a lot of long shots come to fruition and hurt a lot of people.”

Time will tell.

 Disclosure I am long AMJ approx 2 weeks ago.

Five Energy MLPs to Consider for Income

A strong case can be made that master limited partnerships (MLPs) will outperform stocks over the next several years. Supposing that this is the case, I thought I would take a look at a few MLPs I believe are positioned to outperform.

MLPs have a different structure from most publicly traded companies. Instead of being structured as corporations, they are structured as limited partnerships. This has some big tax advantages, but can also create some tax filing complications. Be sure that you understand the MLP structure well before buying any units.

To be considered for inclusion in the following list, an MLP was required to be in the midstream business, have a debt/equity ratio below 200%, and have a current ratio above 1. From there I looked for a combination of low valuations, high profitability, high payout ratio adjusted distributions and distribution growth. Below are the five MLPs that I think best fit those criteria.

Sunoco Logistics Partners L.P. (SXL)
Sunoco Logistics transports and stores crude oil and refined petroleum products for customers in major activity centers in the Northeast, Midwest and Gulf Coast regions of the United States. The company also buys crude oil from U.S. domestic producers and sells it to refiners.
Dividend Yield: 5.47%
Payout Ratio: 48%
5 Yr Dividend Growth: 12.73%
Enterprise Value/Operating Cash Flow: 18.29
Total Debt to Equity: 140.76%
Current Ratio: 1.16
Return on Investment: 15.97%
Click to enlarge


Targa Resources Partners LP (NGLS)
Targa Resources Partners is a Delaware limited partnership engaged in the business of gathering, compressing, treating, processing and selling natural gas and storing, fractionating, treating, transporting and selling natural gas liquids, or NGLs, and NGL products. The partnership owns an extensive network of integrated gathering pipelines and gas processing plants and currently operates along the Louisiana Gulf Coast, accessing the coastal and offshore region of Louisiana, the Permian Basin in West Texas and Southeast New Mexico and the Fort Worth Basin in North Texas. Additionally, the company's natural gas liquids logistics and marketing assets are located primarily at Mont Belvieu and Galena Park near Houston, Texas, and in Lake Charles, Louisiana, with terminals and transportation assets across the United States. Targa Resources Partners is managed by its general partner, Targa Resources GP LLC, which is indirectly wholly owned by Targa Resources Corp. (TRGP).
Dividend Yield: 6.37%
Payout Ratio: 176%
5 Yr Dividend Growth: N/A
Enterprise Value/Operating Cash Flow: N/A
Total Debt to Equity: 146.44%
Current Ratio: 1.13
Return on Investment: 6.04%
Click to enlarge


Enterprise Products Partners L.P. (EPD)
Enterprise Products Partners L.P. (Enterprise Products Partners) is a North American midstream energy company providing a range of services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, refined products and certain petrochemicals. In addition, the company is engaged in the development of pipeline and other midstream energy infrastructure in the continental United States and Gulf of Mexico.
Dividend Yield: 5.5%
Payout Ratio: 109%
5 Yr Dividend Growth: 7.73%
Enterprise Value / Operating Cash Flow: 16.75
Total Debt to Equity: 123.25%
Current Ratio: 1.01
Return on Investment: 8.06%
Click to enlarge


Buckeye Partners, L.P. (BPL)
Buckeye Partners, L.P. is a publicly traded partnership that owns and operates one of the largest independent refined petroleum products pipeline systems in the United States in terms of volumes delivered, with approximately 5,400 miles of pipeline; owns 69 active refined petroleum products terminals; operates and maintains approximately 2,400 miles of pipeline under agreements with major oil and chemical companies; owns a major natural gas storage facility in northern California; and markets refined petroleum products in certain of the geographic areas served by its pipeline and terminal operations.
Dividend Yield: 5.78%
Payout Ratio: 101%
5 Yr Dividend Growth: 6.86%
Enterprise Value / Operating Cash Flow: 17.93
Total Debt to Equity: 144.97%
Current Ratio: 1.3
Return on Investment: 8.94%
Click to enlarge


Plains All American Pipeline, L.P. (PAA)
Plains All American Pipeline, L.P. is a publicly traded master limited partnership (“MLP”) engaged in the transportation, storage, terminalling and marketing of crude oil, refined products and liquefied petroleum gas and other natural gas related petroleum products (together "LPG"). Through its general partner interest and majority equity ownership position in PAA Natural Gas Storage, L.P. (PNG), the company also is engaged in the development and operation of natural gas storage facilities.
Dividend Yield: 6.04%
Payout Ratio: 167%
5 Yr Dividend Growth: 9%
Enterprise Value / Operating Cash Flow: 29.24
Total Debt to Equity: 133.5%
Current Ratio: 1.06
Return on Investment: 5.46%
Click to enlarge

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Diversify By Investing With Non-Correlating ETFs

Never keep all your eggs in one basket. This is a timeless adage that applies to nearly anything, not least of which are your investments and exchange traded funds (ETFs). One way to get diversification is by stocking up on non-correlating assets.

Diversification is one way to reduce risk while optimizing overall returns, and finding non-correlating assets is key to diversification, remarks Gary Gordon for ETF Expert. By reducing risk, an investor should consider a mix of low-correlating assets and some developed market funds.

Most developed markets indexes move in unison with another. Some examples include:

* S&P 500 SPDR Trust (SPY): up 5.9% year-to-date
* iShares S&P Small Cap 600 (IJT): up 7.8% year-to-date
* iShares Global 100 (IOO): up 4.6% year-to-date
* Japan’s iShares MSCI Tokusai Index (TOK): up 9.9% year-to-date

Foreign fixed income, natural resource, commodity, energy, emerging market, currency, and precious metal stocks all had smaller correlations to broad market developed stock funds. Related ETFs include:

* SPDR Lehman International Treasury Bond ETF (BWX): up 1% year-to-date
* iShares Natural Resources Fund (IGE): up 23.9% year-to-date
* iShares Dow Jones-AIG Commodity Index ETN (DJP): up 11% year-to-date
* Alerian MLP ETN (BSR): up 26.2% year-to-date
* iShares Emerging Market Fund (EEM): up 36.7% year-to-date
* Powershares Precious Metals (DBP): up 16.1% year-to-date

Finding non-correlating assets is just one piece of the overall puzzle.When looking into the broad market or specific sectors, a savvy investor should have a strategy in place. Take a look at our investing strategy to get a sense of things.

Disclosure I am long SPY,IJT,DJP and EEM.

The Cushing MLP Total Return Fund Announces Quarterly Dividend

The Cushing MLP Total ReturnFund (NYSE: SRV) declared its quarterly dividend of $0.225 per common share for the quarter ending May 31, 2009. The dividend will be payable on June
10, 2009 to shareholders of record on May 29, 2009. The ex-date for thedividend is May 27, 2009.

The investment objective of the Fund is to obtain a high after tax total return from a combination of capital appreciation and current income. The Fund intends to focus its investments in Master Limited Partnerships with operations in the development, production, processing, refining, transportation, storage and marketing of natural resources. The Fund may generally seek to invest in 20 to 30 issuers with generally not more than 10 percent of Managed Assets in any one issue.

Currently trading at a 27.62% premium to nav. Charges a horrible 2.56% expense ration, and a 15.99% dividend.

Disclosure: None

Rough all Around down and out Day, New JPM Etf MLP and New Currency x-US dollar etf

Sorry haven't been on to do much of a post lately the wife was in hospital today all day and till tomorrow at least I hope. She had her gallbladder removed, which was a huge success. She was very drowsy and out of it I pray I can bring her back home tomorrow. Thanks to all those that sent their letters of encouragement much needed in times like this.

As far as yesterday's action I sold PMD all around ugly earnings report for sure dividend cut coming soon. This stock was purchased for the growth and dividend. I sold for a 21% gain and let is go.

I sold bvf on its dividend cut as well. I sold for 2.01% profit squeaked by on this one. Also sold span it was bought merely for capital gains purchased in march 09 around 7.85 and sold for $10.21 money made ring the register it done its job.

Wisdomtree launched a new currency non us etf that I will be buying soon as my broker can get some shares for me. WisdomTree Dreyfus Emerging Currency Fund (CEW) on the NYSE Arca with an expense ratio of 0.55%. The following quote form wisdomtree:

“Our new Emerging Currency fund fills an important void in the ETF landscape by giving investors the first currency basket product delivered in the 1940 Act fund structure. CEW should be attractive to investors interested in diversifying outside the U.S. Dollar or accessing a less correlated asset class.

“The ETF provides investors exposure to both money market rates across 11 Emerging Market countries, as well as movements in these currencies relative to the U.S. Dollar. Our clients asked us for a basket strategy to complement our individual country currency income funds and we are happy to deliver that today.”

Set to be equally weighted and rebalanced monthly, with no us dollar exposure.

Jpm morgan launched a new MLP etf, tyvm I can not stand getting all thos K-1 forms in the mail each year so this will play the mlp industry without all the hassle of K-1 forms. According to Avi Morris over at seekingalpha.com.


"The ticker symbol is AMJ . AMJ has a limited track record, just over one month, which tracked the spectacular rise of the Alerian MLP Index in April. More information on the fund is available here.

This ETF tracks a portfolio of MLPs aimed at emulating the Alerian MLP Index. But it has advantages others don't because MLPs are master limited partnerships. Partnership ownership is measured in units, not shares. Their quarterly payments are called distributions, not dividends. Distributions are typically 80-90% tax free (which really means tax deferred bringing tax hassle). Some accountants handle the hassle better then others, although ordinary computer tax packages are supposed to do the tax work very well. MLPs send K-1 tax packages around March 15, but they are trying to speed up distribution of the statements.

However, an ETF is a corporation which issues shares. Taxable dividends are reported on 1099s, unless they are paid as stock dividends in which case there is no need for tax statements. As stocks, they are also IRA (retirement account) friendly.

The ETF gives an averaging effect of many MLPs. Those who want to invest in MLP growth but are afraid because of tax issues from distributions, may want to take a look at this ETF."

Tomorrow will be a big day in my roth I am buying a slight step into many new stocks and etfs. I plan to buy a super small take tomorrow approx. 1/20th of a full position then I can dollar cost average into them all in the new few months.

On the list to purchase are, IJH,IWB,PFF,RPV,VB,VOWE,VV, for my index fund folio.

Emerging markets folio is adding, CWI,EFA,GWL,JSC,MDD,SCJ,MEU.

Consumer goods Folio is adding, PM,VGR,KO,LEG and UL.

Commodities folio adding, GAZ,GSC,JJC,JJG,LSC and PTM.

Basic Materials folio is adding, CMC,CMP,NL and POT.

Bonds folio is adding CWB, CFT and EMB.

Financial Folio is adding, WFC,JPM,BAP,BRK-B,UBS and WBK.

This will all be real small starts to just sorta dip my toes in the water. I am pretty sure I am buying most if not all of these stocks on a higher than I would like to do basis. However being on 34 and having loads of time to dollar cost average my way in I am sure in 20 to 30 years I can produce sizable positions in each of these stocks.

Midweek portfolio check-up shows me with 194 holdings up 8.68% year to date, not including dividends. I have rung the register and locked in a profit from sales this year to date of 6.52% percent. So even if the rest of the year is a flop for me I can still come out smelling like a rose.

My dividends for the month of March Rose 130.1059 % try to get that at the bank.

Thats it for now gotta run to bed hope to post more soon. Thanks for your patronage.

43 Risky High Dividend Stocks Paying 15 to 24%

Here is a list of some risky high dividend stocks paying 15 to 24%.

Company	Symbol	Yield %	Price
Compass Diversified Holdings	CODI	15.01	9.2
Pengrowth Energy Trust (USA)	PGH	15.28	6.78
Linn Energy, LLC	LINE	15.33	16.97
Royce Value Trust Inc	RVT	15.38	8.59
Medical Properties Trust, Inc.	MPW	15.41	5.55
Cogdell Spencer Inc.	CSA	15.49	5.81
Calumet Specialty Products Partners, LP	CLMT	15.52	11.64
Kimco Realty Corporation	KIM	15.53	11.15
Martin Midstream Partners LP	MMLP	15.59	19.3
Sun Communities, Inc.	SUI	15.75	14.66
Triangle Capital Corporation	TCAP	15.8	10.1
Mesabi Trust	MSB	15.92	9.65
BlackRock EcoSolutions Investment Trust	BQR	16.05	9.72
K-Sea Transportation Partners LP	KSP	16.09	20.64
EV Energy Partners, LP	EVEP	16.57	18.25
Pennsylvania REIT	PEI	16.76	6.58
MarkWest Energy Partners, LP	MWE	16.85	14.78
Cushing MLP Total Return Fund	SRV	16.89	5.6
OSG America LP	OSP	17.01	8.98
Legacy Reserves LP	LGCY	17.04	12.35
Hatteras Financial Corp.	HTS	17.11	23.15
Vanguard Natural Resources, LLC	VNR	17.27	11.53
Aracruz Celulose SA (ADR)	ARA	17.55	12.47
Alto Palermo SA (ADR)	APSA	18.1	5.22
Prospect Capital Corporation	PSEC	18.14	9.15
Northern States Financial Corporation	NSFC	18.18	5.04
PennantPark Investment Corp.	PNNT	18.22	5.37
Golar LNG Limited (USA)	GLNG	18.25	5.55
Targa Resources Partners LP	NGLS	18.3	12.03
Capital Product Partners LP	CPLP	18.49	9.12
Anworth Mortgage Asset Corporation	ANH	18.6	6.46
ING International High Dividend Equity	IID	18.95	10.36
Cohen and Steers Global Income Builder	INB	18.99	7.08
CBL & Associates Properties, Inc.	CBL	19.07	7.06
The Macerich Company	MAC	19.18	16.67
American Capital Agency Corp.	AGNC	19.23	18.39
Capstead Mortgage Corporation	CMO	19.79	11.4
Hercules Technology Growth Capital Inc	HTGC	20.61	6.14
AEGON NV (ADR)	AEG	20.69	5.07
Apollo Investment Corp.	AINV	20.84	5.12
General Maritime Corporation	GMR	23.15	11
Teekay Tankers Ltd.	TNK	23.96	12.18
Cheniere Energy Partners, LP	CQP	24.67	6.44

Disclosure I am long TNK,GMR,IID,ANH,PSEC,HTS,and TCAP