Back to top

Image: Bigstock

MLP ETFs at a 52-Week High: Here's Why

Read MoreHide Full Article

Oil prices have been steady this year with the WTI crude ETF United States Oil ETF (USO - Free Report) gaining 11.9%. The Middle East conflict, exacerbated by the Israel-Hamas war, has boosted oil prices due to disruptions in oil deliveries to Asia and Europe from the Red Sea fighting.

The Yemen-based, Iran-aligned Houthi group claimed responsibility for an attack on an oil tanker in the Red Sea, adding to the geopolitical crisis in the Middle East. However, the commodity’s run has been anything but smooth this year due to persistent concerns over a looming demand slowdown. Higher-for longer-U.S. interest rates and worsening economic conditions across the globe have resulted in demand destruction.

The International Energy Agency had last week warned of a demand slowdown in 2024, with the warning coming just as data showed the UK and Japan entering a recession. Oil prices saw gains for two consecutive weeks but remained within the 2024 trading range, with a strong dollar, bolstered by last week's high U.S. inflation figures, also affecting crude prices.

Why MLPs Are Good Bets?

Despite being related to the energy space, MLPs normally put up a brave show when oil nosedive. The valor has been thanks to their low correlation with the underlying commodity and the U.S. shale oil boom.

Moreover, MLPs catch investors’ eyes as these do not pay taxes at the entity level and are thus able to pay out most of their income (more than 90%) in the form of dividends like the REIT firms. 

If this was not enough, the Fed is likely to cut interest rates later this year. Since MLPs depend on huge debt burden, if interest rates dive, MLPs will not have to pay higher for the huge chunk of borrowed money which may in turn help them to raise/maintain their dividend payout ratio. 

Thanks to the above-mentioned developments, nearly all MLP ETFs held up pretty strongly in recent times. Below we highlight a few ETFs that have been trading at around a 52-week level.  

ETFs in Focus

Infracap MLP ETF (AMZA - Free Report) – Up 9.2% This Year

The actively-managed InfraCap MLP ETF seeks total return primarily through investments in equity securities of publicly-traded master limited partnerships and limited liability companies taxed as partnerships. The expense ratio of AMZA is 1.64% and the annual yield is 7.54%.

Barclays Plus Select MLP ETN (ATMP - Free Report) – Up 6.2% This Year

The underlying CIBC Atlas Select MLP Index is designed to provide exposure to a basket of midstream U.S. and Canadian master limited partnerships, limited liability companies and corporations in the GICS Energy Sector. The note charges 95 bps in fees.

Etracs MLP Infrastructure Index ETN (MLPB - Free Report) – Up 8.6% This Year

The underlying Alerian MLP Infrastructure Index comprises of 22 energy infrastructure MLPs is a liquid, midstream-focused subset of the Alerian MLP Infrastructure Index. The note charges 85 bps in fees.

Alerian MLP Index ETN JP Morgan – Up 9.7% This Year

The underlying Alerian MLP Index is a cap-weighted, float-adjusted index created to provide a complete benchmark for investors to track the energy MLP sector. The note charges 85 bps in fees.

Published in