Plains All American Pipeline (NASDAQ: PAA) has a fat 8% distribution yield, which income-focused investors might find attractive. But there’s a much bigger story here that you need to wrap your head around before deciding to pull the trigger on buying the stock. And it’s not such a good read. Here’s what you need to know before you consider buying Plains All American Pipeline.
Before digging into the history of Plains All American, it’s important to lay out a simple fact. Master limited partnerships are designed to pass income on to unitholders. It’s a complex structure with notable tax implications, but the income angle is a key issue to consider for most investors. And while Plains All American’s 8% yield is large on an absolute level, it isn’t actually that out of line with its peers. For example, midstream sector bellwether Enterprise Products Partners (NYSE: EPD) offers a yield of 7.8%. Conservatively managed Magellan Midstream Partners‘ (NYSE: MMP) distribution yield is over 9%.