The high-yield sector has soared recently. However, one sector has lagged behind significantly despite having very strong underlying fundamentals. This creates a rare high-yield buying opportunity.
On this week's episode of ETF Prime, Stacey Morris, CFA, head of energy research at VettaFi, discussed the state of play for the energy and energy infrastructure sectors. Afterward, Mike Akins, founding partner at ETF Action, joined the podcast to break down ETF flows.
Oil prices have seen a significant drop, falling from around $90 earlier in the year to nearly $70, which was unexpected.
Energy and midstream energy offer investors high yields, strong momentum, and cheap prices and valuations. Although bullish on midstream energy, I find AMLP less favorable due to its riskier, concentrated, lower-quality portfolio, higher drawdowns, and worse returns compared to peers. AMLP's higher dividend yield of 7.8% is offset by weaker dividend growth, resulting in lower long-term income and yield on costs.
Key Points: Significant drop in oil prices due to weak demand and oversupply.
Investing in high-yield dividend stocks can provide a stable passive income in retirement, reducing sequence-of-return risk compared to index funds. We share a model portfolio for how you can do this. The model portfolio yields a weighted average 8% while also growing its payouts at a rate that should meet or even beat inflation over the long term.
Dividends and buybacks continue to drive shareholder returns for MLP/midstream investors. Dividends have long been a priority for energy infrastructure companies, and in recent years, midstream/MLPs have used excess cash flow for dividend growth and opportunistic buybacks.
The Federal Reserve's 50-basis-point rate cut seems like a big tailwind for dividend stocks. However, the rate cut also brings several warnings to the dividend stock space. We discuss what these are and how we are positioning our portfolio to navigate rate cuts.
AMLP offers high yield and has outperformed oil and gas ETFs recently, amid weak crude oil and natural gas prices. AMLP's valuation remains attractive with a P/E ratio of 11.2x and a PEG ratio under 1, despite some emerging risks. Key risks include weaker economic activity, higher borrowing costs, and potential natural disasters impacting MLPs' cash flows.
My ideal stock has four specific qualities. There is one sector where these qualities still exist in abundance. I share some of the most attractive opportunities in the space and why this opportunity may not last much longer.
Midstream has remained resilient as oil prices have fallen in recent weeks. Despite weakening oil prices, the midstream segment has remained defensive and has held up better than other energy subsectors.
Picking individual stocks can outperform the market if you enjoy analyzing companies and have the discipline to manage your investments carefully. There are important lessons that investors need to follow if they are going to have success picking stocks. I share three of some of the most important lessons I have learned over the years that I wish I had known at the beginning of my stock-picking career.