Want $7,000 a Year on $100K? These Pipelines Yield 7%+ While Your Cash Pays Less

The post Want $7,000 a Year on $100K? These Pipelines Yield 7%+ While Your Cash Pays Less appeared first on 24/7 Wall St..

Cash yields keep slipping further this year. The Fed has cut the funds rate by 75 basis points over the past year to 3.75%, the average 12-month CD pays just 1.65%, and the 10-year Treasury sits at 4.51%. That backdrop is why the Alerian MLP ETF (NYSEARCA:AMLP) keeps drawing buyers chasing income. AMLP yields 7.78% on a portfolio of pipeline partnerships, pays quarterly, and issues a 1099 instead of the K-1 forms that scare retail investors away from owning MLPs directly. The yield case is real. The vehicle case is weaker than most AMLP holders realize.

Why income investors keep buying AMLP

The hidden cost inside the wrapper

A RIC-structured midstream fund

The Global X MLP & Energy Infrastructure ETF (NYSEARCA:MLPX) solves the structural problem. It caps direct MLP exposure at under 25% and fills the remainder with midstream C-corps such as TC Energy, Enbridge, Williams, Kinder Morgan, and ONEOK, thereby qualifying it as a regulated investment company. No fund-level corporate tax accrues against NAV. The expense ratio is 0.45%, about half of AMLP’s. The 30-day SEC yield is lower at 4.18%, but the tax drag and the broader midstream tilt explain the structural difference between the two wrappers.

The tradeoffs are not trivial

An MLPX investor on the same $100,000 collects closer to $4,180 in annual distributions at the current SEC yield, roughly $2,800 less in cash than AMLP at 7.78%. A retiree drawing the dividend to live on may prefer the higher current payout. MLPX also leans more on Canadian midstream names like Enbridge and TC Energy, which carry currency and cross-border tax considerations AMLP avoids. And selling AMLP in a taxable account can trigger capital gains and recapture the deferred tax that has been suppressing NAV. The Alerian Energy Infrastructure ETF (NYSEARCA:ENFR) is the cheaper RIC alternative, with a 0.35% expense ratio and a 4.45% 30-day SEC yield, for investors who want a closer index-style midstream basket.

Sizing the swap

Holders with AMLP in an IRA can rotate without a tax bill. In a taxable account, partial rotation, or directing new contributions to MLPX or ENFR rather than adding to AMLP, sidesteps a lump-sum gain event. The dollar-income gap shrinks meaningfully if a portion of the position stays in AMLP for the yield while new capital builds a RIC-structured sleeve underneath it.

What it suggests right now

The post Want $7,000 a Year on $100K? These Pipelines Yield 7%+ While Your Cash Pays Less appeared first on 24/7 Wall St..