The Allure of Midstream/MLP Companies
Investors are turning their gaze towards the world of midstream/MLP companies as a promising avenue to enhance their investment portfolios in the quest for maximum returns.
Extending into 2023, energy infrastructure firms have employed a robust inflow of cash to offer dividends to investors through share repurchases. The expenditure on buybacks by midstream/MLP companies hit a substantial $3.7 billion in the previous year alone. The final quarter of 2023 bore witness to an impressive $700 million in buybacks, originating from just six businesses.
A Secure Haven for Dividend Growth
The consistent growth in dividends has been a sturdy pillar for midstream/MLP entities. Reports reveal that around 82% of the Alerian MLP Infrastructure Index (AMZI) upped their dividend payouts in the final quarter of 2023 compared to the preceding year. Noteworthy is the fact that both AMZI and the Alerian Midstream Energy Index (AMNA) have steered clear of any reduction in dividends post-July 2021. As of March 14, AMZI was yielding a solid 7.13%, with AMNA following closely at 5.91%.
The Alerian MLP ETF (AMLP): A Gem for MLP Exposure
For investors in search of exposure to MLPs, the Alerian MLP ETF (AMLP) presents itself as a gem for portfolio inclusion. AMLP strives to mirror the AMZI’s performance and boasts a net expense ratio of 0.85%.
The fund has consistently delivered substantial returns to investors, recording a notable surge of over 33% over the past 12 months, with a 12% uplift in the last quarter. This trend mirrors the index, with AMZI showing a 23.76% rise in total return for the year 2023. Tallying up the year-to-date performance, AMZI has risen by 10.79%, witnessing inflows of around $178 million in the process.
Riding the Wave of Success
The heightened demand for MLP ETFs comes as no surprise, with AMLP recently surpassing $8 billion in assets under management. The success of the fund harmoniously aligns with the index’s own triumphs, as evidenced by the AMZI hitting a five-year pinnacle in price returns not too long ago.
Learn More: Record High for Underlying Index of AMLP and MLPB
With a solid foundation of buybacks and dividend growth propelled by the relentless generation of free cash flow, midstream MLPs and companies are continuing their legacy of providing robust returns to investors.
AMZI serves as the underlying index for the Alerian MLP ETF (AMLP) and the ETRACS Alerian MLP Infrastructure Index ETN Series B (MLPB). Similarly, AMNA serves as the underlying index for the ETRACS Alerian Midstream Energy Index ETN (AMNA).
vettafi.com is a property of VettaFi LLC (“VettaFi”). VettaFi functions as the index provider for AMLP, MLPB, and AMNA, earning an index licensing fee. However, AMLP, MLPB, and AMNA are not originated, promoted, endorsed, or distributed by VettaFi, and VettaFi bears no responsibilities or liabilities associated with the issuance, management, marketing, or trading of AMLP, MLPB, and AMNA.
For additional news, insights, and analysis, explore the dedicated Energy Infrastructure Channel.
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The perspectives presented herein reflect the views and opinions of the author, which may not necessarily align with those of Nasdaq, Inc.
