MLP ETFs provide attractive investment opportunities, particularly for those interested in energy infrastructure. These ETFs pass a substantially high percentage of earnings to shareholders and for their tax advantages. So, investing in MLPs through ETFs can offer diversification benefits and potentially higher yields due to the pass-through structure of MLP distributions.
Given the backdrop, let’s look at the best-performing MLP ETFs Alerian MLP ETF (AMLP), Global X MLP ETF (MLPA), and First Trust North American Energy Infrastructure Fund (EMLP), with diverse investment opportunities.
MLPs (Master Limited Partnerships) typically operate in the energy sector, mainly in midstream (pipelines, storage, terminals), where demand for energy infrastructure to transport and store the resources remains relatively steady as energy production continues to grow.
According to GlobalData’s deals database, over 257 M&A deals were announced in the first quarter of 2024 in the global oil & gas industry, worth a total value of $73.30 billion, reflecting a positive trajectory of the market and having positive implications for MLP ETFs.
The global oil and gas market size is expected to reach $65.80 billion by 2032, exhibiting growth at a CAGR of 15.8% during the forecast period (2024-2032). The market growth is influenced by robust energy consumption, geopolitical tensions, and rapid technological advancements.
MLP ETFs are primarily known for providing higher yields as compared to other income-generating investments. Also, since they are structured as partnerships, MLPs avoid corporate income taxes at both the federal and state levels. So, they maintain unique tax advantages of their underlying holdings.
Given these encouraging trends, let’s look at the fundamentals of the top three MLP ETFs, beginning with number 3.
ETF #3: Alerian MLP ETF (AMLP)
AMLP seeks to track the market-cap-weighted index of publicly traded energy infrastructure MLPs. The companies listed in its index earn the majority of their cash flow from midstream activities involving energy commodities. The ETF tracks the Alerian MLP Infrastructure Index.
The fund has assets under management (AUM) of $8.41 billion. AMLP’s top holdings include Western Midstream Partners, LP (WES) with a 13.64% weighting, followed by Energy Transfer LP (ET) at 13%, and Enterprise Products Partners L.P. and MPLX LP (MPLX) at 12.90% and 12.79%, respectively.
The ETF has a total of 16 holdings, with its top 10 assets comprising 95.79% of its AUM. AMLP’s expense ratio is 0.85% compared to the category average of 0.81%. Over the past month, its fund inflows were $138.20 million, and $638.92 million over the past six months.
AMLP pays an annual dividend of $3.53, which translates to a 7.78% yield at the current price level. Moreover, the fund’s dividend payouts have increased at a CAGR of 7.8% over the past three years. Notably, AMLP has paid its dividends for 13 consecutive years.
AMLP has surged 2.7% over the past six months and 17.6% over the past year to close the last trading session at $45.35. It has a beta of 1.42. The fund’s NAV was $45.45 as of June 4, 2024.
AMLP’s POWR Ratings reflect solid prospects. The fund has an overall rating of B, translating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
AMLP has an A grade for Trade and Buy & Hold. Within the A-rated MLP ETFs group, it is ranked #7 of the 21 ETFs.
To access all AMLP’s POWR Ratings, click here.
ETF #2: Global X MLP ETF (MLPA)
MLPA tracks a market-cap-weighted index of US-listed midstream MLPs and is structured as a C-corporation. The fund emphasizes entities that focus on the transportation, storage, and processing of various energy products. MLPA typically invests in midstream pipelines and storage facilities that have less sensitivity to energy prices.
MLPA tracks the Solactive MLP Infrastructure Index. With $1.62 billion in AUM, the fund’s top holdings are Sunoco LP (SUN) with a 12.94% weighting, ET at 12.72%, and Enterprise Products Partners L.P. and MPLX at 11.63% and 10.54%, respectively. The ETF has a total of 21 holdings, with its top 10 assets comprising 88.87% of its AUM.
The fund has an expense ratio of 0.45%, lower than the category average of 0.81%. MLPA’s fund inflows were $34.95 million over the past month and $107.48 million over the past three months.
MLPA pays an annual dividend of $3.48, which translates to a 7.49% yield at the prevailing price level. In addition, the fund paid dividends for 11 consecutive years.
MLPA has gained 5.2% over the past nine months and 9.8% over the past year to close the last trading session at $46.49. It has a beta of 1.4. The fund’s NAV was $46.47 as of June 4, 2024.
MLPA’s sound fundamentals are reflected in its POWR Ratings. The fund has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The fund has an A grade for Trade and Buy & Hold. Of the 21 ETFs in the MLP ETFs group, MLPA is ranked #2.
Click here to see all the MLPA ratings.
ETF #1: First Trust North American Energy Infrastructure Fund (EMLP)
EMLP is an actively managed fund that invests in North American energy infrastructure MLPs and LLCs. These include U.S. and Canadian natural gas and electric utilities, corporations operating energy infrastructure assets like pipelines or renewable energy production, utilities, and MPLs. The fund's investment strategy emphasizes current distributions paid to shareholders.
The fund has an AUM of $2.53 billion. Its top holdings include Enterprise Products Partners L.P. (EPD) with an 8.26% weighting, followed by ET at a 6.94% weighting, and Plains GP Holdings LP Class A (PAGP) and ONEOK, Inc. (OKE) at 4.78% and 4.73%, respectively. EMLP has a total of 65 holdings, with the top 10 assets comprising 47.10% of its AUM.
The fund has an expense ratio of 0.96% compared to the category average of 0.81%. Over the past six months, EMLP’s fund inflows came in at $10.75 million.
EMLP pays an annual dividend of $1.08, which translates to a 3.54% yield at the current price level. Moreover, the fund’s dividend payouts have increased at a CAGR of 4.7% over the past three years. EMLP paid dividends for 11 consecutive years.
EMLP has gained 9.8% over the past six months and 14.1% over the past year to close the last trading session at $30.54. It has a beta of 0.81. The fund has a NAV of $30.57 as of June 4, 2024.
EMLP’s POWR Ratings reflect this strong outlook. The ETF has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
EMLP has an A grade for Buy & Hold and Trade. It also has a B grade for Peer. The fund has topped the list of 21 ETFs in the same group.
To access all the POWR Ratings for EMLP, click here.
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AMLP shares were unchanged in premarket trading Wednesday. Year-to-date, AMLP has gained 11.01%, versus a 11.96% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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