Oil’s Slide Exposes MLP ETF Risks

The new year has already brought several MLP dividend cuts, including those from Breitburn Energy Partners (NasdqGS: BBEP), Linn Energy (NasdaqGS: LINE) and LinnCo (NasdaqGS: LNCO) and with that, expectations of more MLP dividend reductions. With an average trailing 12-month yield of about 15%, Memorial Production Partners (NasdaqGS: MEMP) and Vanguard Natural Resources (NasdaqGS: VNR) have been rumored to be potential dividend cutters.

None of those stocks are found in AMLP, but further dividend cuts could send a chill throughout the MLP space. Investors have avenues for coping with such a scenario.

For example, the InfraCap MLP ETF (NYSEArca: AMZA), which debuted in October, can employ hedging via derivatives and even short MLPs during periods of increased market stress because the ETF is actively managed.

InfraCap Active MLP ETF