While MLPs/energy infrastructure investments can fill a few different roles in client portfolios, they are best known for providing generous income.
MLPs or energy infrastructure companies aren’t intended to be used as a fixed income substitute. However, the segment can be used to enhance yield in an income sleeve. MLPs tend to provide more attractive income than what investors will find in other equity income investments or bonds.
A recent poll from VettaFi showed advisors are primarily allocating to MLPs/energy infrastructure for income potential. When asked how they primarily use MLPs/energy infrastructure in portfolios, over 40% of respondents said income, according to 2024 Midstream/MLP Outlook: Can the Positive Momentum Continue? (Date: January 10, 2024. Sample size: 134 respondents.)
See more: “Why You Should Consider MLPs for Your Income Portfolio”
Additionally, midstream yields are not sensitive to the Fed’s actions or interest rate movement. This sets them apart from many other income-generating investments and adds to their appeal in the current environment. This means funds like the Alerian MLP ETF (AMLP) and the Alerian Energy Infrastructure ETF (ENFR) can potentially provide generous income throughout various interest rate environments.
AMLP’s underlying index was yielding 7.2%, while the underlying index for ENFR was yielding 6.3% as of February 27.
Attractive Total Return Potential
AMLP’s underlying index recently reached a five-year high on a price return basis. It climbed to a level not seen since February 2019.
See more: “Underlying Index for AMLP, MLPB Reaches 5-Year High”
At the same time, the fund reached a four-year high in assets under management. AMLP, the largest MLP ETF available to investors, closed above $8 billion in assets last week for the first time since January 2020.
For more news, information, and analysis, visit the Energy Infrastructure Channel.
vettafi.com is owned by VettaFi LLC (“VettaFi”). VettaFi is the index provider for AMLP and ENFR, for which it receives an index licensing fee. However, AMLP and ENFR 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 and ENFR.