During oil’s bear market, some big name oil producers and master limited partnerships (MLPs) reduced or halted share buybacks. Others suspended, cut or did not grow dividends.
Understandably, those actions can leave a sour taste in an investor’s mouth, but do not count out the energy sector when it comes to income-generating opportunities.
The Energy Select Sector SPDR (NYSEArca: XLE), the largest equity-based energy exchange traded fund, and rival energy ETFs are delivering for investors as the energy sector is the best-performing group in the S&P 500 this year.
Making the sector’s rebound this year all the more impressive is that it comes against the backdrop of still low oil prices, little help in the way of significant production cuts and massive spending reductions by global oil majors.
Related: 4 Energy ETFs may be at Near-Term Tops
For investors looking for a plain vanilla approach to energy, XLE and rivals such as the Fidelity MSCI Energy Index ETF (NYSEArca: FENY) are viable income options due to their hefty weights to Dow components Exxon Mobil (NYSE: XOM) and Chevron (NYSE: CVX). The dividend situations for Exxon Mobil and Chevron, the two largest U.S. oil companies, are solid at the moment.
“Broadly-diversified energy ETFs are often the best option for investors seeking more variation in their retirement portfolios, but since a large amount of funds have been allocated to them in recent months, choosing the right ones can affect returns,” according to TheStreet.com.
[related_stories]MLPs are also favored income destinations, but retirees or investors close to retirement should consult with their financial advisors and accountants before allocating to MLPs in retirement accounts.
The ALPS Alerian MLP ETF (NYSEArca: AMLP), the largest exchange traded fund holding master limited partnerships (MLPs), is getting a lift this year from higher oil prices and investors’ thirst for higher-yielding assets.
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.
Related: Downtrodden MLP ETFs May Offer Long-Term Opportunity
MLPs don’t make their money based on oil or gas prices. Unlike other energy sector stocks, 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.
Other options in the MLP ETF arena include the Global X MLP & Energy Infrastructure ETF (NYSEArca: MLPX), InfraCap MLP ETF (NYSEArca: AMZA) and the Tortoise North American Pipeline Fund (NYSEArca: TPYP).
For more news on MLPs, visit our MLP category.