Chart of the Day: One of the Strongest Income Rallies I’ve Ever Seen

It’s one of the biggest rallies I’ve seen, and it’s coming from one of the most unlikely places: an income security.

I first learned about master limited partnerships (MLPs) working with Carla Pasternak, the Chief Strategist for High-Yield Investing. Carla’s been singing their praises for years. Not only do MLPs pay out ridiculous yields, but they are also an energy play.

The majority of MLPs own pipelines and other energy infrastructure. The partnerships receive a fee for shipping oil or natural gas through their network — a fee based mostly on volume moved. That’s a steady business.

You could go as far to call MLPs the perfect income investment, except the taxes can be a real headache — especially if held in an IRA of 401(k). But there’s a loophole: buying MLP funds let’s them deal with the tax issues; you just get one simple tax form at the end of the year.

That tax simplicity, combined with a rising market, high dividends and rising energy prices has helped create one of the strongest bull markets I’ve ever seen in an income investment.

The chart below shows the past two years for the Kayne Anderson Energy Total Return Fund (NYSE: KYE). KYE is paying 6.4% and holds about half its assets in MLPs, with the rest in shipping companies, oil royalty trusts and other energy-focused investments.

There’s no telling how much longer this run can last, but until the shares break the red trend line drawn above, the party is still going strong for this high-yield play. (Note: KYE carries an expensive price tag… a 4.3% expense ratio. That’s fine when we’re in a bull market, but it will be an anchor if the fund begins trending flat or lower.)

A few days ago, I showed you why gold miners are the value play compared with physical gold. Tomorrow, I have another chart to show you that says gold miners are undervalued by at least 30%. Stay tuned…

P.S. — If you’re looking to squeeze as much cash out of your portfolio as possible, you need to see this. In short, a Texas man has figured out how to get the equivalent of a $112 dividend check every single day of the year. Here’s how he does it…