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Energy Transfer at the NYSE
Source: NYSE
Pipeline operator Energy Transfer‘s (ET) acquisition of Crestwood Equity Partners (CEQP) highlights the potential benefits of investing in master limited partnerships, CNBC’s Jim Cramer said Wednesday.
“I urge people to think about this group as being a place to go if you want tax-free income,” Cramer said on “Squawk on the Street.”
Energy Transfer is what’s known as a master limited partnership, a common business structure in the oil-and-gas transportation corner of the energy sector. The way they’re set up, MLPs don’t have to pay federal income taxes, which enables them to return more money to investors through income distributions than they would if they were a typical corporation. That’s a key advantage for investors, helping to offset the taxes on income distributions that they’re still required to pay.
“With interest rates high, you tend to not want to own [MLPs],” Cramer acknowledged. But after a period of underperformance, there’s some momentum within the group. For example, the Kayne Anderson Energy Infrastructure Fund is up more than 8% over the past three months.
Announced before the bell Wednesday, Energy Transfer’s all-equity deal for Crestwood Equity Partners is valued at roughly $7.1 billion. The deal is expected to close in the fourth quarter of this year.
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