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Three 5-Star Stocks to Energize Your Portfolio

Cash in on these undervalued firms' powerful incentive structure.

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What would you say to the following proposal: You provide 2% of the capital required to finance a project that will generate 15% cash returns on investment, and in exchange you will receive up to 50% of the cash flow of the project? Too good to be true? Not necessarily.

The above scenario is the limit case for general partners of many master limited partnerships  we cover. Because of an incentive structure designed to motivate the general partner to increase quarterly cash distributions for limited partners, general partners can indeed collect up to half of the incremental cash flow produced by MLPs. We'll show you how this works, how you can take advantage of these asymmetric payouts, and which general partners we think are bargains right now.

Jason Stevens does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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