Now some economists will say that core inflation -- which excludes food and energy -- is only 2%, but I have yet to meet a person who doesn't need food or energy. These rising prices eat into returns. For example, investors in 10-year Treasuries, currently yielding 2.125%, are losing purchasing power as they keep their money in them (or breaking even for those investors who don't eat).
Oil pipelines are regulated by the Federal Energy Regulatory Commission and have contracts that adjust for inflation annually. For the next five years, their contracts adjust at the rate of the producer price index for finished goods, +2.65%. The structure of their contracts should allow these companies' payouts to rise faster than the rate of inflation, no matter the rate. The company I like best in this space is Magellan Midstream Partners (NYSE: MMP). To be clear, Magellan is not a stock; it is a master limited partnership. MLPs can be a great way for investors to earn income and pay less in taxes, but they may require significantly more tax hassles and shouldn't be held in IRAs.
Source: Motley Fool
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