Well, it appears I'm about to register IHUB's first ever post focusing on Sanchez Midstream Partners LP. I'm honored!
First off, a word or two about it---what it is, how it operates and why it might be a suitable investment for others.
To begin, SNMP is an example of a master limited partnership. Basically this means that it doesn't have shareholders; rather, it has unitholders. On the surface the distinction might seem pointless yet it speaks to an important difference to us and to Uncle Sam. Limited partnerships are a type of "trust" account that evolved as a result of a program Ronald Reagan brought on enabling a formerly corporate entity to re-emerge as a vehicle through which a senior or anybody else could elect to purchase a piece of the company. Instead of shares, we owners now hold "units." These are like pieces of the whole pie. And 90% of the company inflow must, by law, be distributed to unit holders. In this way the operating concern is relieved of having to pay taxes on distributed income. We, participants as we are, will pay tax on amounts of distributed income we receive---called "distributions." However, much of the income derived of these partnerships is referred to as qualified income---meaning little taxes will be paid by us. Most of this income is actually a "return of capital" meaning that the government will recognize it not as our found money but, rather, as the MLP returning our seed capital or part thereof and therefore not deserving of further taxation.
Additionally, seniors holding their stakes for less than a year are taxed up to 15% but holding the stock for a year or longer means you will be taxed with a high end of just 10%. Being a senior myself, I like it
Sanchez was looking pretty good to me the last couple of months and I sensed things were turning around for the better. As this week was nearing, I decided to take a chance on my instincts and pick up a couple of hundred units. I launched my starter position with 200 units at a cost of $10.99. Obviously I'm flat at the moment but will likely be adding once market excitement subsides and the price dwindles as happens after an MLP goes ex-distribution and then looks like idle cash until a couple of months rolls by and hungry distribution hunters begin piling on for the next handout.
SNMP is currently paying $1.80/unit for a yield of 16.39%. There's so much meat on this bone that the yield will tolerate a considerable leap in valuation/unit while remaining able to represent a sweet income opportunity. In short, I expect the unit valuation to rise much higher.
That's my entry post on this interesting company. There will be much more to come as more and more analysts begin to piece things together with the end result being that of highlighting this play.
Happy hunting, everybody!
