Dear Mr. Berko:

I am 78, my wife is 81, and like many investors today, we want income. So what do you think of investing in Alerian MLP, which is an exchange-traded fund paying 6 percent. I’m angry, disgusted and disappointed that the government keeps interest rates so low. I’ve worked all my life, and so has my wife. We raised four children, paid for their education and managed to keep a little over $500,000 in our 45 years of working. We got hurt twice by brokers in 1987 and 1998 and are afraid of being taken advantage of once again. So we planned a worry-free, non-stock market retirement, certain we could always get a minimum of 4 percent, or $20,000, from this money in CDs. Now it looks like we have to go back into the market because we are coming up short every quarter and we do not want to reduce our standard of living. Each of us have good pensions and good Social Security checks, and we have a part-time business from home that earns us between $10,000 and $14,000 annually. So we’re not hurting, but we miss that extra $15,000 to $20,000 we thought we could depend on from our CDs and the many little things it afforded us. I didn’t write to complain but to tell you our circumstances and ask for your advice on Alerian. It’s recommended by a broker who is a customer of our home business, and he said not to buy it from him (his firm charges too much) but to buy it from a discount broker. At least he is honest about this. Please tell us if it is OK to buy. Is it safe? Can we invest $100,000 in it?

– W.S., Vancouver, Wash.

Dear W.S.:

Low interest rates are strangling the resources of most retired folks, frightening them into desperate decisions. And in the process, colonies of snake oil salesmen ooze from the woodwork like Formosan termites sucking the marrow from their tired bones. It’s a war zone out there, and many trusting retirees have been savaged by hucksters, banksters and brokesters. However, Alerian MLP (AMLP-$16.22), an exchange-traded fund (ETF), while not the safest stock on the planet, is certainly a lot less volatile than many, and the 6 percent dividend appears dependable. And yes, you can purchase $100,000, but I think that’s overload and overboard. The share price has been moderately stable since its initial public offering at $15 in September 2010, while the dividend has been flat as a pancake. Because you can afford the risk, I have no objection to a 1,000-share purchase as a long-term investment. And as most readers know, I have been a big fan of dividend-paying stocks for more than 30 years, especially dividend stocks that grow their distributions frequently. I believe that growing dividends are infinitely more important to most investors than growing principal. And inarguably, dividend growth is much more dependable than principal growth. So one can, with a much greater degree of certainty, predict the potential dividend payout of a stock five years hence than its potential share-price growth. In a falling market, investors who depend upon principal growth to maintain their living standard are often hurt, and must liquidate even more principal to pay growing bills. But those who invest for dividends and dividend growth continue to receive their incomes and are much less affected. Simple common sense.

However, I’m not an AMLP aficionado. It does provide lower risk via diversification, but an informed investor could do significantly better owning some of the issues in the AMLP portfolio, earning much higher yields and excellent tax benefits. Exterran Partners LP(EXLP-$20.70) at 9.6 percent, Boardwalk Pipeline Partners LP (BWP-$27.11) at 7.9 percent, Energy Transfer Partners LP (ETP-$46.65) at 7.7 percent and Regency Energy Partners LP (RGP-$22.57) at 8.2 percent may be some good choices, all of which have grown their dividends frequently since inception. These companies and other master limited partnerships (MLPs) I’ve recommended in the past own enormous assets that are subject to huge depreciation charges. This depreciation reduces the MLP’s earnings but have zero effect on the MLP’s cash flow. This depreciation is also passed on the shareholder, creating a significant tax advantage and in most instances, 80 to 90 percent of an MLP’s dividends are not taxable. It does, though, reduce your cost basis on the stock. However, AMLP shareholders are unable to benefit from this advantage. So you may also consider owning a few individual MLP equities for their tax advantage as well as the higher yield and growing income.

Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo.com. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com. COPYRIGHT 2012 CREATORS.COM