MLPs
Master limited partnerships (MLPs) are popular because of their high payouts that qualify for favorable tax treatment. The Alerian MLP Index (symbol AMZ) cannot be invested in directly, but the JPMorgan Alerian MLP ETN tracks this index (symbol AMJ). As of March 2013, AMJ had a 4.7% dividend vs. 2.0% for the S&P. Since its April 10, 2009 inception to March 12, 2013, AML was up 122% versus 99% for the DJIA.
The AMJ ETN means the investor does not have to file a K-1 form, which is normal for MLPs. This ETN (which is not leveraged) seeks to track the performance of the Alerian Infrastructure Index. The actual index is comprises 25 energy infrastructure MLPs; the majority of the income from these holdings come from the transportation, storage, and processing of energy commodities.
The index is cap weighted; its largest three holdings comprise over 26% of the portfolio: Kinder Morgan Energy Partners (KMP), Enterprise Products Partners (EPD), and Energy Transfer Partners (ETP). Holdings are divided into three broad areas: petroleum transportation (41%), natural gas pipelines (33%), and gathering and processing (26%).