Midstream Energy Dividend ETF Report | May 2024

Midstream Energy Dividend ETF Key Takeaways

North American energy infrastructure continues to offer generous yields and growing dividends supported by solid free cash flow generation. As of 30 April 2024, MMLP’s underlying index, AEDW, was yielding 6.71%, and companies with an investment-grade credit rating represented nearly 92% of the index by weighting.

MMLP holdings began reporting earnings for 1Q24 in April, with results in-line or slightly above Wall Street expectations. Midstream’s fee-based business models result in stable and predictable cash flows. As such, despite price volatility for US oil and natural gas, companies have either reaffirmed or raised full-year 2024 EBITDA guidance and continue to forecast modest growth.

Several MMLP holdings raised quarterly dividends for 1Q24. As of 30 April, 74.9% of AEDW constituents by weighting grew dividend payouts based on announcements for 1Q24 (paid in 2Q24) relative to 1Q23, with 15.7% of the index by weighting having not yet announced dividends for 1Q24. Meanwhile, 77.9% of AEDW had a buyback authorization in place.

While AEDW dipped -1.64% in April on a net-total-return basis, equities were broadly challenged toward the end of the month, and the index outperformed the S&P 500, which slid -4.1% on a total-return basis.  Year-to-date, AEDW has gained 8.64% on a net-total-return basis, adding to the 12.79% net total return seen in 2023.

One of the key topics in the energy sector’s earnings season has been the anticipated growth in energy-intensive data centers in the US due to artificial intelligence (AI). Utility providers are expecting a significant rise in electricity demand. While renewable energy will play a role in meeting this demand, new data centers tapping into utility grids could lead to increased demand for natural gas. While the outlook for natural gas was already strong, the potential demand driven by data centers adds a significant incremental positive (read more).

Greater demand for natural gas can lead to more production and more volumes for midstream to process and transport.

In AEDW, gathering and processing names (transport gas from wellhead and process it into usable form) represent 16.2% of the index by weighting, and natural gas pipeline transportation names represent 45.6% of the index as of 1 May 2024.

Sources available upon request. Data as of 30/04/2024. 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.

Constituent News

MPLX (MPLX, 10.20% Weight) reported 1Q24 results ahead of consensus expectations and repurchased $75 million common units during the quarter.

Enterprise Products Partners (EPD, 9.58% Weight) announced earnings results for 1Q24 ahead of Wall Street forecasts and reported $40 million in equity repurchases.

Kinder Morgan (KMI, 8.02% Weight) increased its dividend 1.7% to $0.2875 per share.

ONEOK (OKE, 7.36% Weight) noted increased volumes across all business segments in its 1Q24 results and raised 2024 adjusted EBITDA guidance by $75 million at the midpoint.

Western Midstream Partners (WES, 2.74% Weight) increased its distribution 52% sequentially to $0.8750 per unit for 1Q24 in line with previously issued guidance.

Targa Resources (TRGP, 1.41% Weight) increased its dividend 50% to $0.75 per share in line with previously issued guidance.

DT Midstream (DTM, 0.90% Weight) increased its dividend 6.5% to $0.735 per share.

Midstream Energy Dividend ETF Performance
As of 30.04.2024

Alerian Midstream Energy Dividend UCITS ETF-1.68%7.07%14.83%8.58%20.23%56.18%124.29%
Alerian Midstream Energy Dividend Index (NTR)-1.64%7.09%14.93%8.64%19.90%53.95%118.37%

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 30/04/2024

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.

This report was written by, and is the opinion of VettaFi, the index provider of the Alerian Midstream Energy Dividend Index, the underlying index of MMLP. VettaFi does not issue, sponsor, endorse, sell, or promote MMLP.

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