Stock #1: Enterprise Products Partners (EPD)

Enterprise Products Partners (EPD) sports a wonderful growth record, having raised its distribution for 18 quarters in a row. The partnership is also yielding an eye-popping 9.2%, mostly tax-deferred (see my note on taxes below).

Normally, I'm wary of the highest yielders, because they're often facing some kind of financial squeeze. In this case, though, EPD's yield has blipped for purely technical reasons: The partnership issued $205 million of new units (shares) during the second week of January, depressing the price. EPD traded back down with the market in early March but has since rebounded nicely from $18 to $23.

Stock #2: ONEOK Partners (OKS)

My second pick, ONEOK Partners (OKS), has steadily pumped out cash to Profitable Investing subscribers since my first recommendation in 1994. (Along the way, we've rolled up a total return of 382%.)

Unlike EPD, which moves crude oil and petrochemicals as well as natural gas, this MLP focuses exclusively on gas — the safest market niche for a pipeline. Moreover, substantially all the gas gathered, processed, stored and transported by this company comes from the U.S. and Canada, limiting any political risk. Current yield: 9.5%.

Tax Implications of MLPs

Unlike ordinary corporations, master limited partnerships pay no federal income tax. Instead, they pass through essentially all their income and deductions to the partners.

For pipeline partnerships, this means that depreciation deductions shelter a large chunk of your cash payout (usually 80% or more) from current taxation. MLPs do add an element of complexity to your tax return, so you should check with your accountant to see whether the benefits of tax deferral justify the extra paperwork.

For more details on the tax implications of MLPs, visit the Website of the National Association of Publicly Traded Partnerships (www.naptp.org).

As editor of Profitable Investing, Richard E. Band is the newsletter world's #1 authority on investing for low-risk growth. His flagship Total Return Portfolio has tripled in value since its inception in 1990, while taking far less risk than the popular stock market index funds. See for yourself what Profitable Investing can do for you. In fact, try it for 6 months, 100% risk-free. Click here to get started.