Midstream/MLP companies are showcasing potential as valuable options for investors seeking to maximize total return.
Energy infrastructure companies have continued to use vigorous cash flow to provide investor returns via buybacks. In 2023 alone, midstream/MLP companies spent roughly $3.7 billion on buybacks. In 4Q23, buybacks saw nearly $700 million, from just six companies.
Dividend growth has also remained robust for midstream/MLP businesses. Based on payouts for 4Q23, roughly 82% of the Alerian MLP Infrastructure Index (AMZI) increased payouts over the previous year. Notably, neither AMZI nor the Alerian Midstream Energy Index (AMNA) have seen a dividend cut since July 2021. As of March 14, the AMZI and AMNA were yielding 7.13% and 5.91%, respectively.
Potentially Valuable Portfolio Addition for MLP Exposure
For investors looking for MLP exposure, the Alerian MLP ETF (AMLP) could be a valuable addition to a portfolio. AMLP aims to track the performance of AMZI, and has a net expense ratio of 0.85%.
The fund has provided investors with strong, consistent returns. It is up over 33% the last 12 months, while rising roughly 12% within the last three months. This is echoed with the index’s performance, with AMZI rising 23.76% in 2023 on a total return basis. In year-to-date performance, AMZI is up 10.79%, while AMLP has seen roughly $178 million in inflows.
The strong investor demand for MLP ETFs comes as AMLP recently climbed to over $8 billion in assets under management. The fund’s success closely correlates with the index itself, with AMZI recently reaching a five-year high on a price return basis.
See More: Underlying Index for AMLP, MLPB Reached 5-Year High
With buybacks and dividend growth supported by free cash flow generation, midstream MLPs and corporations continue to deliver solid returns to investors.
AMZI is the underlying index for the Alerian MLP ETF (AMLP) and the ETRACS Alerian MLP Infrastructure Index ETN Series B (MLPB). AMNA is the underlying index for the ETRACS Alerian Midstream Energy Index ETN (AMNA).
vettafi.com is owned by VettaFi LLC (“VettaFi”). VettaFi is the index provider for AMLP, MLPB, and AMNA, for which it receives an index licensing fee. However, AMLP, MLPB, and AMNA are not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of AMLP, MLPB, and AMNA.
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