MLP

Whether MLPs are a good investment depends on your financial goals and the performance of the MLP. As with any investment, MLPs come with their own set of pros and cons.

Investors appreciate their high dividends, a large portion of which could be tax-deferred. However, most MLPs operate in the energy industry, which makes them somewhat concentrated. They can also be quite volatile, and MLPs sometimes have to slash dividends if they have less cash to pay to investors.

MLPs have high dividends for two main reasons. One is that they are not taxed at the corporate level if they pay at least 90% of their income to investors. The other is that they operate assets, such as pipelines that create consistent cash flows.