Midstream Energy ETF Report | February

Midstream Energy ETF Key Takeaways

Energy infrastructure companies have continued to focus on free cash flow generation, while returning excess cash to shareholders through dividend growth and opportunistic buybacks. Several MMLP holdings announced dividend increases in January. The underlying index for the Midstream Energy ETF, AEDW, was yielding 7.0% at month end, and companies with investment-grade credit ratings represented over 92% of the index by weighting.

AEDW, rose 1.4% on a net total-return basis in January, outperforming the STOXX Europe 600 Oil and Gas Index (SXEP), which was down -1.8% on a total-return basis. AEDW also outperformed the US energy benchmark, the Energy Select Sector Index (IXE), which was down -0.50% on a total-return basis in January.

MMLP holdings have begun reporting full-year 2023 earnings results, as well as EBITDA guidance for 2024. Energy infrastructure companies are expected to see moderate year-over-year EBITDA growth in 2024, likely mid-single-digit percentages.

At the end of January, 48.6% of AEDW by weighting had increased their dividend payout for 4Q23 (paid in 1Q24) relative to 3Q23, while 34.2% had maintained, and the remaining 17.2% has not yet declared a dividend. See below for more details. As of 31 January, 77.3% of AEDW constituents by weighting have a buyback authorization in place.

While oil and natural gas prices could remain volatile in 2024, energy infrastructure companies tend to be relatively insulated from commodity prices due to their fee-based business models. In a volatile energy backdrop, midstream’s defensive qualities – stable cash flows and healthy yields – can be particularly beneficial.

Constituent News

Enterprise Products Partners (EPD, 10.0% Weight) increased its quarterly distribution by 3% sequentially and repurchased $96 million in equity in 4Q23, bringing total 2023 buybacks to $187 million.

Kinder Morgan (KMI, 7.8% Weight) updated its 2024 guidance to reflect the STX Midstream acquisition. KMI now expects 2024 EBITDA to be up 8% relative to 2023. KMI repurchased $132 million in equity in 4Q23, bringing total 2023 buybacks to $522 million.

Williams Companies (WMB, 7.1% Weight) increased its quarterly dividend by 6.1% to $0.475 per share.

ONEOK, Inc. (OKE, 7.1% Weight) increased its quarterly dividend by 3.7% to $0.99 per share, with plans to target 3-4% annual dividend growth. OKE also announced a $2 billion buyback authorization, which it expects to use over the next four years.

Energy Transfer (ET, 10.3% Weight) increased its quarterly distribution by 0.8% to $0.315 per unit.

Cheniere Energy Partners (CQP, 6.6% Weight) maintained its base quarterly distribution of $0.775 per unit and increased the variable component by 2.0% to $0.26 per unit.

Plains All American (PAA/PAGP, 3.10% Combined Weight) increased its quarterly payout by 18.7% to $0.3175 per share.

Hess Midstream (HESM, 0.58% Weight) increased its quarterly distribution by 2.7%. HESM expects a 12.5% increase in Adjusted EBITDA for 2024, with a long-term target of at least 10% growth in 2025 and 2026. HESM is targeting annual distribution growth of at least 5% through 2026.

Sources available upon request. Data as of 31.12.2024. Please remember that all performance figures are showing net data. Past performance is not indicative of future performance, and when you invest in ETFs your capital is at risk.


Midstream Energy ETF Performance
As of 31.01.2024

Alerian Midstream Energy Dividend UCITS ETF1.41%5.83%5.84%1.41%8.14%24.26%74.83%106.72%
Alerian Midstream Energy Dividend Index (NTR)1.44%7.32%7.01%1.44%9.04%24.64%74.04%103.91%


Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 31/01/2024

Performance before inception is based on back tested data. Back testing is the process of evaluating an investment strategy by applying it to historical data to simulate what the performance of such strategy would have been. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance. Past performance for the index is in USD. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”) before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in this product. When you invest in ETFs and ETCs, your capital is at risk.

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