A Positive Outlook for MLP ETFs in the Year Ahead | ETF Trends

Income-minded investors should consider exchange traded funds that cover master limited partnerships or the midstream energy space.

On Friday, Wells Fargo analysts provided a positive outlook on the midstream/master limited partnership/renewable energy infrastructure sector based off a midstream, utility, and renewables symposium, TheStreet reports.

Specifically, the analysts singled out companies including Energy Transfer (ET), Oneok (OKE), Magellan Midstream Partners (MMP), and Plains All American Pipeline (PAA).

“The tone of the symposium was positive, even after the recent pullback in commodity prices, as management teams still view current prices as constructive,” Wells analysts Michael Blum and Praneeth Satish write in a note.

Managers “are emphasizing capital discipline (higher hurdle rates for investment, modest capital spending, lack of appetite for M&A), balance sheet strength, cash return to investors, an openness to energy transition opportunities and continued ESG improvements,” the analysts add.

Looking ahead, the analysts project that midstream companies could experience modest growth in production volumes for 2022, and the potential Build Back Better legislation from the Joe Biden administration is seen “as relatively benign to the oil and gas sector.”

Due to the sector’s perceived outlook, “we remain constructive heading into 2022, given a solid fundamental backdrop, continued capital discipline, and a projected increase in cash return to shareholders,” Wells Fargo analysts say.

To keep tabs on the master limited partnerships and midstream energy space, investors can look to related ETF strategies, such as the ALPS Alerian MLP ETF (NYSEArca: AMLP), the JPMorgan Alerian MLP Index ETN (NYSEArca: AMJ), the Alerian Energy Infrastructure ETF (ENFR), and the ETRACS Alerian Midstream Energy Index ETN (NYSEArca: AMNA). Energy infrastructure or midstream energy companies are engaged in the transportation, storage, and processing of natural resources, typically fossil fuels. These companies follow more fee-based business models that benefit from the transportation, processing, and storage of energy in the U.S.

For more news, information, and strategy, visit the Energy Infrastructure Channel.