With just a few days left in the third quarter, midstream companies are positioned well going into earnings season.
Distribution announcements should start surfacing in the coming weeks, ahead of or in conjunction with third-quarter earnings releases.
Midstream has made significant progress rebuilding a track record of growing payouts in recent quarters. Names that cut their dividends during the energy market volatility and pandemic-related uncertainty of 2020 have largely returned to growth, Stacey Morris, head of energy research at VettaFi, wrote in August.
Comparing 2Q22 payouts with 2Q21, more than 80% of the Alerian Midstream Energy Index (AMNA) and the Alerian MLP Index (AMZ), by weighting, grew their payouts. There have been four consecutive quarters in which there were no dividend cuts across the Alerian energy infrastructure index suite, Morris said in August.
While crude oil and natural gas prices have been more volatile in recent weeks, with oil prices rising Wednesday after drawdowns late last week, midstream is insulated from this volatility by business model.
Midstream differs from other segments of energy in the way that it earns a profit, providing its services for a fee, which makes it less sensitive to fluctuations in oil and natural gas prices. Energy infrastructure companies are those that perform the shipping and handling functions of the energy industry. Examples include companies that operate pipelines, facilities that process natural gas and natural gas liquids, and those that operate storage and export terminals.
The Alerian Energy Infrastructure ETF (ENFR) and the Alerian MLP ETF (AMLP) are two funds to consider for investors looking to add midstream to a portfolio.
For more news, information, and strategy, visit the Energy Infrastructure Channel.
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