ETFs
Top 3 MLP ETFs Offering Diverse Investment Opportunities
MLP ETFs offer attractive investment opportunities, particularly for those interested in energy infrastructure. These ETFs pass on a significantly high percentage of profits to shareholders and for their tax benefits. Thus, investing in MLPs through ETFs can provide diversification benefits and potentially higher returns due to the pass-through structure of MLP distributions.
Given the context, let’s take a look at the best performing MLP ETFs Alerian MLP ETF (AMLP), Global X MLP ETF (MLPA), and the First Trust North American Energy Infrastructure Fund (EMLP), with diverse investment opportunities.
MLPs (Master Limited Partnerships) typically operate in the energy sector, primarily in the midstream sector (pipelines, storage, terminals), where demand for energy infrastructure to transport and store resources remains relatively stable as the energy production continues to grow.
According to GlobalData’s deals database, more than 257 mergers and acquisitions transactions were announced in the first quarter of 2024 in the global oil and gas industry, with a total value of $73.30 billion, reflecting a positive market trajectory and having positive implications for MLP ETFs.
The global oil and gas market size is expected to reach $65.80 billion by 2032, growing at an all-time high. 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 offering higher returns compared to other income-generating investments. Additionally, because they are structured as partnerships, MLPs avoid corporate income taxes at the federal and state levels. They therefore maintain unique tax advantages of their underlying assets.
Given these encouraging trends, let’s take a look at the fundamentals of the top three MLP ETFstarting with number 3.
ETF #3: Alerian MLP ETF (AMLP)
AMLP seeks to track the market cap-weighted index of publicly traded energy infrastructure MLPs. Companies listed in its index derive the majority of their cash flows from midstream activities related to energy commodities. The ETF tracks the Alerian MLP Infrastructure Index.
The fund has assets under management (AUM) of $8.41 billion. AMLP’s principal holdings include Western Midstream Partners, LP (WE S) with a weighting of 13.64%, followed by Energy Transfer LP (AND) at 13%, and Enterprise Products Partners LP and MPLX LP (MPLX) at 12.90% and 12.79% respectively.
The ETF has a total of 16 holdings, with its top 10 holdings accounting for 95.79% of its assets under management. AMLP spending rate is 0.85% compared to the category average of 0.81%. Over the past month, its cash inflow was $138.20 million, and over the past six months it was $638.92 million.
AMLP pays an annual dividend of $3.53, which translates to a yield of 7.78% at the current price level. Additionally, the fund’s dividend distributions have grown 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 latest trading session at $45.35. It has a beta version of 1.42. The net asset value of the fund was $45.45 as of June 4, 2024.
AMLP POWR Ratings reflect strong prospects. The fund has an overall rating of B, which translates to a Buy in our proprietary rating system. POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
AMLP has an A rating for trading and buying and holding. In category A MLP ETF group, it is ranked #7 out of 21 ETFs.
To access all of AMLP’s POWR ratings, Click here.
ETF #2: Global X MLP ETF (MLPA)
MLPA tracks a market-cap-weighted index of U.S.-listed midstream MLPs and is structured as a C corporation. The fund emphasizes entities that focus on transportation, storage and processing of various energy products. MLPA typically invests in pipelines and midstream storage facilities that are less sensitive to energy prices.
MLPA tracks the Solactive MLP Infrastructure Index. With $1.62 billion in assets under management, the fund’s top holdings are Sunoco LP (SUN) with a weighting of 12.94%, ET at 12.72%, and Enterprise Products Partners LP and MPLX at 11.63% and 10.54%, respectively. The ETF has a total of 21 holdings, with its top 10 holdings accounting for 88.87% of its assets under management.
The fund has an expense ratio of 0.45%, lower than the category average of 0.81%. MLPA’s inflows stood at $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 yield of 7.49% at the current price level. Additionally, the fund has 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 latest trading session at $46.49. It has a beta version of 1.4. The net asset value of the fund was $46.47 as of June 4, 2024.
MLPA’s strong 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 rating for trading and buy-and-hold. Among the 21 ETFs in the MLP ETF group, MLPA is ranked #2.
Click here to see all MLPA notes.
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, companies operating energy infrastructure assets such as pipelines or renewable energy generation, utilities and MPLs. The fund’s investment strategy emphasizes current distributions paid to shareholders.
The fund has assets under management of $2.53 billion. Its major holdings include Enterprise Products Partners LP (EPD) with a weighting of 8.26%, followed by ET with a weighting of 6.94% and Plains GP Holdings LP Class A (PAGP) and ONEOK, Inc. (OK) at 4.78% and 4.73% respectively. EMLP has a total of 65 holdings, with the top 10 holdings accounting for 47.10% of its assets under management.
The fund has an expense ratio of 0.96% compared to the category average of 0.81%. Over the past six months, EMLP’s cash inflows amounted to $10.75 million.
EMLP pays an annual dividend of $1.08, which translates to a yield of 3.54% at the current price level. Additionally, the fund’s dividend distributions have grown at a CAGR of 4.7% over the past three years. EMLP has 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 latest trading session at $30.54. It has a beta of 0.81. The fund has a net asset value 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 rating for Buy, Hold and Trade. It also has a B rating for Peer. The fund tops the list of 21 ETFs in the same group.
To access all POWR ratings for EMLP, Click here.
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Shares of AMLP were unchanged in premarket trading Wednesday. Year to date, AMLP has gained 11.01%, compared to an 11.96% rise in the benchmark S&P 500 during the same period.
About the author: Rjkumari Saxena
Rajkumari began her career as a writer, but gradually moved into financial journalism, leveraging her business background. Fascinated by the interplay of business and economic changes in equities, she aspires to grow as an analyst. With a knack for simplifying complex financial concepts, his mission is to provide investors with information that leads to profitable decisions. More…