Investors seeking to access the energy infrastructure space through passively managed vehicles have a menu of options, including half a dozen passive ETFs. Beyond ETFs, investors may also consider exchange-traded notes (ETNs).
EIPI, an ETF formed from MLP CEFs, uses a covered call strategy to reduce volatility and enhance income, making it compelling for investors. The fund's mix of MLPs, Oil & Gas Majors, and utilities, combined with active management, positions it well for a range-bound market. EIPI's innovative covered call structure targets low volatility and capital gains, outperforming peers like AMLP on a risk/reward basis.
Investors may prefer to own Master Limited Partnerships (MLPs) through an ETF for diversified exposure and to avoid receiving a Schedule K-1. Due to the pass-through structure, investing directly in an MLP will result in receiving a K-1 during tax season.
Summary Midstream companies are expected to continue generating free cash flow and prioritizing returns to shareholders. A muted oil outlook can favor midstream given its defensive qualities, namely fee-based businesses and generous yields.
Investing involves inherent uncertainties, but income investing with a focus on absolute current income growth can mitigate some risks. Yet, even if such a strategy is devised, risks remain on the income cut side. In this article, I have shared two ~6% yielding picks, one from REIT and one from MLP sector.
MLP ETFs have generated attractive returns for investors, but remain a compelling investment opportunity as valuations in the space have not become overextended. Valuations suggest midstream ETFs still have compelling upside potential, even as the Alerian MLP ETF (AMLP) has generated strong returns for four consecutive years and outperformed broader energy for two consecutive years.
Investing for high yields and for income growth requires different strategies. Yet, sometimes it is possible to find a middle ground by locking in decent yields and growing distributions. In the article I share my three favorite picks for capturing income growth in 2025.
The AI boom, low rates and the lure for dividends make master-limited-partnerships or MLP ETFs hot investments currently.
Following a careful analysis of the Zacks Oil and Gas - Refining & Marketing MLP industry, we advise focusing on companies like TRGP, SUN and WES.
Midstream ETFs are the only segment of energy that has seen inflows in 2024, as broader energy and other subsectors have continued to see outflows. The Alerian MLP ETF (AMLP) has seen $1.2 billion in net flows year to date through November 19.
Western Midstream offers a 9% distribution yield and is growing EBITDA and free cash flow rapidly, making it an attractive investment. The MLP focuses mainly on natural gas assets in the Delaware and DJ Basins and has potential to use its excess free cash flow for other acquisitions or distribution increases. Valued at an enterprise-value-to-EBITDA ratio of 9.1X, Western Midstream is attractively priced compared to industry averages.
My top midstream picks are Energy Transfer, Enbridge, and Enterprise Products Partners, with EPD being the best for durable income. After dissecting the fundamentals of WES, I have concluded that WES definitely deserves a spot in my Top 2 income producing midstream list, ranking just below EPD. In this article, I explain in a detailed manner why I have become so bullish on WES.