Alerian, one of the most well-known providers of energy infrastructure and master limited partnership (MLPs) indexes, said Wednesday it launched two new dividend-weighted benchmarks – the Alerian Midstream Energy Dividend Index (AEDW) and the Alerian MLP Infrastructure Dividend Index (AMDW).
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.
“We are seeing growing demand across the investment community for more sophisticated midstream indexes. Leveraging our deep energy infrastructure research and data rigor, the dividend-weighted index suite is a natural continuation of our commitment to innovation,” said Alerian CEO David LaValle in a statement.
Midstream, Too
The midstream space is usually more defensive and less volatile than other energy segments due to steady, reliable cash flows.
The Alerian Midstream Energy Dividend Index (AEDW) “is a fundamentally-weighted index based on the liquid, dividend-paying portion of the North American energy infrastructure market. The capped, dividend-weighted index reflects the proportionate share of aggregate annual cash distributions each company is expected to pay,” according to Alerian.
Additionally, the midstream space is usually more defensive and less volatile than other energy segments due to steady, reliable cash flows.
Midstream and MLP businesses are included in the ETF strategies because the segment is fundamentally related to the sector company businesses, can potentially increase yield generation and are historically excluded from S&P 500 and Dow Jones Averages, providing another layer of diversification benefits.
The Alerian MLP Infrastructure Dividend Index (AMDW) “is a fundamentally-weighted index based on the liquid, dividend-paying portion of the energy infrastructure Master Limited Partnership (MLP) market. The capped, dividend-weighted index reflects the proportionate share of aggregate annual cash distributions each company is expected to pay,” according to Alerian.
For more information on master limited partnerships, visit our MLPs category.
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