ETF Trends
ETF Trends

VanEck will reverse split the VanEck Vectors High Income MLP ETF (NYSEArca: YMLP). The exchange traded fund, which focuses on master limited partnerships, will be reverse split 5-for-1 at the market open on June 29, 2016.

VanEck acquired YMLP and the VanEck Vectors High Income Infrastructure MLP ETF (NYSEArca: YMLI) in a deal that was finalized earlier this year after being announced last year.

Related: MLP ETFs Acquired by VanEck

“For shareholders who hold quantities of shares that are not an exact multiple of the reverse split ratio (for example: a multiple of 5 for a 1-for-5 split), the reverse splits will result in the creation of fractional shares. Post-split fractional shares will be redeemed for cash and sent to the broker of record. This redemption may cause some shareholders to realize a gain or loss, which could be a taxable event for those shareholders. Otherwise, the reverse split will not result in a taxable transaction for shareholders of the Fund,” according to VanEck.

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YMLP, which holds 21 stocks, has a distribution yield of 8.7%. MLPs are not directly affected by oil prices since the sector acts more like an energy toll road and profits off crude oil flowing threw its pipelines. However, the recent selling pressure in the energy market spilled over to MLPs as traders feared the low prices would force producers to cutback on production, which would mean less volume going through MLPs.

MLPs primarily deal with the distribution and storage of energy products, so their business model is less reliant on the commodities market since MLPs profit off the quantity of oil and natural gas they are able to move around. Consequently, MLPs have historically shown a weaker correlation to energy prices over longer periods as MLPs act more like energy toll roads, profiting on the volume of oil moving through their pipelines.

Related: Master Limited Partnership ETFs Are Back on Trend

With the markets flooded with oil and prices still depressed, basic economic theory suggests that consumption could rise to capitalize on the cheap crude. With higher consumption, MLP tollkeepers could profit off the increased transportation or storage of energy.

For more news on MLPs, visit our MLP category.

VanEck Vectors High Income MLP ETF