Investors going gaga over MLP 's

Bloomberg BW recently featured an article on the popularity of MLP's among investors. Master Limited Partnerships in oil&gas exploration or infrastructure deliver fat dividends which is particularly attractive in an  era of zero interest rates and Wall St analysts are just as enthusiastic. Bloomberg BW notes that MLP 's are Wall Street's dream given the fees they generate in debt and stock issuances. The S&P MLP Index returned 28 % p.a. over the past 5 years which also explains the popularity of MLP's. MLP's are however complex investments that can easily be misunderstood as I explain in my book, and now some say MLP 's are "the next great debacle" to come. For non US investors, it's important to keep in mind that MLP's dividends are taxed at the US level, final taxation depending on any Double Tax Treaty .If there is no treaty, US taxation reaches 30% of the distribution. The taxation of income from MLP's can quickly become very complex because of the peculiarities of these partnerships, that's because the distributions are in fact composed of earnings and depreciation which means return of capital . In addition, heirs of foreign holders may also be subject to US estate tax .

Data and chart by Bloomberg