Master limited partnership ETFs and ETNs specilize on the logistics of oil and gas transport. The aftermath of Hurricane Sandy will keep MLPs in focus while supplying investors a decent yield.
“MLPS are mostly focused in the ‘midstream’ energy space, meaning the processing and transportation of energy commodities. These companies own and operate the pipelines that deliver gas and liquids across the country, as well as the storage facilities and processing plants that bring quality product to market. They charge fees based on volume, not volatile commodity prices, so although MLPs are in the energy sector, they behave remarkably consistently,” Abby Woodham wrote for Morningstar.
Historically, MLPs are less risky than other mid-cap energy shares and they are less volatile than the S&P 500, reports Woodham. [MLP Tax Warning]
The JP Morgan Alerian MLP Index ETN (NYSEArca: AMJ) is a debt instrument that gives investors exposure to profits from a number of pipeline systems controlled by MLPs. Master Limited Partnerships focus on the midstream of the segment of the supply and demand model. The focus is on gathering, transport pipelines, storage, terminals, initial processing, separation, and fractionating for oil or gas, but not the actual commodity itself. AMJ yields 5.09% and is up about 5% over the past 6 months. [MLP ETFs for Alternative Income, Yields Over 6%]
Hurricane Sandy has brought this midstream segment into focus as well as pure logistics, Kent Moors for Money Morning wrote. Areas that are in need of major overhaul and investment are storage and distribution of gas, efficiency in transportation of the commodities, and distribution of oil, gas and electricity. These areas were put on the back-burner for later, but the need to address them is currently urgent. [MLP ETFs Offer Yield and Long-Term Value]
For the long term, investors who want exposure to the energy sector and believe that U.S. energy demand and production are going to grow at a decent pace will find AMJ meets their demand. [This Sector ETF Could Rebuild After Hurricane Sandy]
Other MLP ETFs:
- First Trust North American Energy Infrastructure Fund (EMLP)
- Global X MLP ETF (MLPA) yields 6.4%
- Credit Suisse Cushing 30 MLP Index ETN (MLPN) yields 5.29%
JP Morgan Alerian MLP Index ETN
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.