Specifically, the underlying Alerian Index removed two MLPs in its most recent quarter. Targa Resources Partners (NYSE: NGLS) was acquired by its parent company, Targa Resources Corporation (NYSE: TRGP). In addition, the Index eliminated NGL Energy Partners (NYSE: NGL) due to market capitalization requirements. Both MLPs were yielding more than 30% at the time of their removal from the Index.
“We believe that stringent indexing requirements help investors in the long run,” Held said. “Higher quality names have historically performed better in a tough economic environment and have a track record of better distribution stability.”
In keeping with its quality focus, the underlying index is made up of about 86% investment-grade MLPs. By contrast, there is not a single investment grade MLP outside of the Index.
The MLP ETF includes a group of dividend growing partnerships. Held pointed out that the underlying names in AMLP grew their distributions at a faster rate last quarter for the third quarter in a row. As witnessed in other areas of the market, dividend growth stocks and ETFs have outperformed in the long run, whereas dividend cutters have historically underperformed. AMLP outperformed many other MLP-related exchange traded products for the past year and 3-year periods.
“We think, at the end of the day, MLP investors are interested in owning the best combination of both quality and yield for their portfolios,” Held added.
Based on the May 10 price, the indicated yield for AMLP is 8.05%, which still ranks among the top half of all MLP funds.
For more news on MLPs, visit our MLP category.