The partnership structure and the tax form nobody warns you about

It traded at 36.79 this morning, +1.62% on the session. I want to write about structure, because in this corner of the market the structure is a material part of what you own.

Why the yields look better here

Partnerships are not taxed at the entity level. Income passes through to holders, which avoids one layer of tax and is a genuine economic advantage that shows up as a higher distribution.

That advantage is real. It also arrives with consequences that a buyer scanning a yield screen will not see.

What comes attached

• Reporting is more involved than a standard dividend, and arrives later in the year
• Distributions are partly a return of capital, which reduces cost basis and creates a liability at sale rather than eliminating one
• Holding these inside certain tax-advantaged accounts can create complications that defeat the point
• Governance differs from a corporation, and unitholders have less say than shareholders would

None of this makes it a bad investment. All of it makes it a different investment from the one a yield comparison implies, and the differences favour a long-term holder over someone who might need to sell in a hurry.

Why I like it anyway

The underlying business is fee-based, contracted infrastructure with coverage I am comfortable with and leverage inside its historical range. That is what the price buys. The structure is a feature for a patient holder and a nuisance for everyone else.

If the reason a yield is higher is a tax structure, the yield is not higher. It is differently taxed, and the paperwork is the price.

Who this is not for

Anyone who would be irritated by the administration, or who might need to exit quickly for reasons unrelated to the business. Both are perfectly reasonable positions and both argue for the corporate structures instead.