ETFs tracking master limited partnerships continue to draw interest from investors searching high and low for yield.
It’s important for investors to do extra homework when considering ETFs following asset classes outside the traditional comfort zone of stocks and bonds.
MLPs are companies that are involved with the storage and transportation of commodities such as oil or natural gas, such as pipelines.
The sector has attracted attention in recent years due to above-average yields and diversification properties because it tends not to move in lockstep with the stock market.
“The operating income from the transportation of fuels tends to be much less volatile than the prices of energy commodities. As such, MLPs tend to be stable, relatively high income-generating assets,” says Morningstar analyst Abraham Bailin.
Exchange traded products for this asset class include JP Morgan Alerian MLP Index ETN (NYSEArca: AMJ), Alerian MLP ETF (NYSEArca: AMLP), Yorkville High Income MLP (NYSEArca: YMLP) and Global X MLP (NYSEArca: MLPA).
AMJ and AMLP are currently offering dividend yields in the 5% to 6% range.
MLPA sports the lowest expense ratio of the group at 0.45%, ETF Database notes.