(FORTUNE Magazine) – The bull is back in master limited partnerships. These hybrid entities, whose units trade like stocks, currently pay out annual distributions equal to 11.4% of their price, three times what stocks yield these days. More than two-thirds of the 131 listed MLPs are up this year. Total return for the group averages 18%, vs. 5% for Standard & Poor's 500-stock index. MLPs were clobbered last year by the market crash and fears that they would be taxed as corporations. But Congress voted last December to preserve the tax status of existing MLPs for at least ten years, and in some cases indefinitely -- which means that earnings can go on escaping corporate taxes and pass undiminished to investors. MLPs rebounded briskly. ''Some of the screaming buys aren't there anymore, but many will outperform the market handily next year and beyond,'' says Joseph Harvey, who follows MLPs for Robert Stanger & Co., an investment advisory firm in Shrewsbury, New Jersey. When choosing an MLP, look at more than yield. Some partnerships are set up , for a fixed period of, say, six years, after which they are liquidated or converted to corporations, with investors receiving cash or stock. As a rule, a partnership should have a record of increasing distributions supported by cash flow rather than borrowings. The business the partnership is in can make a difference. Higher-risk categories currently include money management companies and oil and gas partnerships. Hotels and motels, however, are a good business because the owners can quickly jack up room rents if inflation accelerates. The dominant player in the budget category is Motel 6, a Dallas-based chain of 439 motels in 40 states. After the MLP was formed two years ago, it began wooing business travelers to augment its vacationing family clientele. The occupancy rate climbed from 69% to 75%, and room rates are up 21% to an average $25. Analyst Leslie Maladowitz at Drexel Burnham Lambert estimates that the MLP's cash flow will grow at an 11% rate for several years. Total return so far this year: a torrid 43%. Shopping center partnerships are also a hedge against rising prices, because rents are tied to an inflation index. One MLP that analysts like is EQK Green Acres, which owns most of the Green Acres shopping mall in suburban Long Island, New York. Cash flow is rising, thanks to a 99.5% occupancy rate and increases in rents. John Higgins, an analyst at Realty Stock Review, a newsletter published by Audit Investments in Montvale, New Jersey, considers the units cheap. He estimates that they are trading at a 13% discount to net liquidation value per unit. A promising commodity play is Freeport-McMoRan Resource Partners, a leading producer of phosphate and nitrogen fertilizers spun off from oil and mineral producer Freeport-McMoRan two years ago. This summer's drought depleted grain stocks. If farmers respond by planting more acreage next spring, as many expect, fertilizer consumption will rise at least 10%. This would mean higher prices for Freeport's products. The general partners who run the MLP guarantee a minimum distribution of $2.40 per unit through June 30, 1991. But Lauren Wong, an analyst at Oppenheimer & Co. in New York, figures that lowered costs and strong demand should support a distribution of at least $2.70 per unit in 1988 and 1989. Cable TV partnerships are considered a good recession-proof investment. One MLP that analysts like is Falcon Cable Systems, which operates cable hookups in several score rural California and Oregon communities. Fred Anschel, an analyst at Dean Witter Reynolds, expects a 30% increase in cash flow this year, thanks to greater efficiencies and rate increases brought about by deregulation. Jones Intercable Investors, which serves affluent suburbs of Washington and Kansas City, has an even higher yield than Falcon. Both MLPs cover distributions from borrowings, but in this case the analysts are not concerned. These MLPs' assets are expected to appreciate considerably, leaving more than enough to pay off debt when the partnerships are terminated in the mid-1990s.

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: SHOVELING OUT CASH Stock dividends pale beside the distributions from these master limited partnerships. That's a Freeport-McMoRan fertilizer warehouse in Louisiana.