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Stock Strategist

Is There More Value in the Pipeline for MLPs?

MLPs had a great run this year but may still be attractive to income investors.

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Note: We're re-featuring this article, originally published on Dec. 15, 2010, as part of our Retirement Income Week.

Master limited partnerships have been on a tear over the last year, with Morningstar's MLP Composite Index up 33% over the trailing 12 months through Jan. 25 versus a 20% gain on the S&P 500. The MLP Focus Index consists of the 20 MLPs in our coverage universe trading at the greatest discount to our risk-adjusted fair value estimates. It's up 36% over the trailing 12 months. Looking across our MLP investment landscape, the space looks fully valued, if not perhaps a touch richly valued. Given this outlook, are there compelling reasons to initiate new MLP positions currently?

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