LEG & ET

I missed big energy back in November. Raised 25% cash in December. I would like to invest in energy to start a retirement portfolio. I’m thinking midstream with they’re long term contracts, they seem to be safer than buying oil companies at these historic highs. Nice dividends with a slow roll up in price. Low(ish) PE’s. Has anyone done any research on ET or LEG?

Energy Transfer LP (ET) is not really a stock, but a limited partnership. The payout isn’t a dividend, but a distribution. Distributions are usually treated different at tax-time. Depending on the income generated by your ET position (and other LOP positions), you may end up having to file multiple State tax returns (quick glance shows ET operates in at least 9 states )

2 Likes

dividend or distribution – all looks the same in cash balance.

1 Like

dividend or distribution – all looks the same in cash balance.

Yes, it does, and the current yields tend to be pretty good.

But when it comes time to do your taxes, and you get a K-1 schedule instead of a 1099-DIV, and you’re sweating over how to enter the 5 pages of stuff included (hint: much of it won’t but you won’t know which things without going through the details), it looks a lot different. AND those nice current dividend yields, which might be largely nontaxable, are reducing your tax basis in your investment. Just like the income and deductions reported on the K-1 increase or reduce your basis. So in reality, you never know exactly what your basis is until the end of the year. And how much of any gain realized is ordinary income vs. capital gains.

In short, MLPs and stocks are different investment types.

Bill

7 Likes

But tax situation is different. Qualified dividend is taxed at capital gains rate. Distribution is not qualified so taxed as ordinary income but after deducting expenses and depletion.

4 Likes

K-1’s are definitely more work at tax time so I’m selective about which MLP’s I’ll hold.
TurboTax has finally got it’s guided K-1 entry working reasonably well.

Been in MMP and EPD since mid-2000’s.
ET K-1 is too much hassle for me.

3 Likes