Get Ready: The First MLP ETF Is Here
August 25th at 11:00am by Tom Lydon
If you’re one of the many investors seeking yields right now, a new way to get them is now here: the industry’s first exchange traded fund (ETF) aimed at master limited partnerships (MLPs) launched today.
The Alerian MLP ETF (NYSEArca: AMLP), marketed by ALPS Distributors, and will track a subset of the master limited partnership market – otherwise known as MLPs. Until now, exchange traded notes (ETNs) were the only way to access the asset class. AMLP tracks the Alerian MLP Infrastructure Index and has an expense ratio of 0.85%.
According to Tom Lauricella for The Wall Street Journal, MLPs are mostly companies that operate and own natural-gas and oil pipelines and storage facilities. The collect payments from those who use their properties. In recent years, they’ve benefited from the astronomical growth seen in energy infrastructure. [High Yield MLPs Attract Investors.]
A few other facts about the industry include:
- Payouts from MLPs average just south of 7%; with 10-year Treasury yields below 2.5%, this is very appealing for investors.
- MLP securities are technically stocks, but the companies are structured as limited partnerships and shares all profits with shareholders. [More About MLP ETFs And ETNs.]
- Distributions aren’t taxable until shares are sold.
- According to Dividend Detective, MLPs work like this: Crude oil pipeline operators are steady in business, and are based on the amount of volume transported, not the price of oil. Natural gas operators are based on the price of natural gas due to the fact that they are based on gathering and processing contracts which expose the operators to the changes in the pries of natural gas and byproducts.
In addition to the new ETF, there are a number of MLP ETNs available. For more stories about MLPs, visit the MLP category.
- Credit Suisse Cushing 30 MLP Index (NYSEArca: MLPN)
- UBS E-TRACS 2x Long Alerian MLP Infrastructure ETN (NYSEArca: MLPL)
- UBS E-TRACS Alerian MLP Infrastructure ETN (NYSEArca: MLPI)
- UBS E-TRACS Alerian Natural Gas MLP ETN (NYSEArca: MLPG)
- JPMorgan Alerian MLP Index ETN (NYSEArca: AMJ)
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.