imaginima/iStock via Getty Images On March 3rd, 2022, the United States Energy Information Agency released its Annual Energy Outlook 2022 at the Bipartisan Policy Center. I wish more people would read through the information posted on the EIA’s website.
s website and through their detailed reports. Traditional energy such as oil & gas has been controversial as some political figures continue to wage war on the sector. From fighting to change public perception to pressuring financial institutions to limit investments, some political figures will stop at nothing until 100% of America’s energy is created from renewable sources. Look, I am a fan of renewable energy, and I have investments in Clearway Energy (NYSE: CWEN ), Stem Inc (NYSE: STEM ), and I am debating adding NextEra Energy (NYSE: NEE ) to my portfolio. I applaud renewable energy, and I am invested in renewable energy companies, but I haven’t believed that a solution is an all-or-nothing approach.
America needs cheap American Energy regardless of whether it comes from the oil & gas or renewable sector. As the calls for an increase in renewable investments intensify due to geopolitical unrest, on March 3rd, 2022, the EIA has solidified what I have been saying for years, contradicting what the loudest political figureheads have been preaching. Global X has a wide range of ETF products, and I am warming up to their Global X MLP ETF (NYSEARCA: MLPA ). MLPA has a long distribution history dating back to its inception in 2012. It has a large distribution yield that exceeds 7%. MLPs are critical infrastructure that powers our economy regardless of what some individuals want to believe. Think about the chaos that would occur if roaming blackouts because the norm, and when you went to turn on the lights, only darkness surrounded you in the morning? We don’t have the luxury of moving to 100% renewables today, tomorrow, next year, next decade, or the decade after that. I have been a pipeline investor for years, and MLPA offers a clean way to invest in some of America’s premier infrastructure companies without filing the dreaded schedule K-1 at tax season. Global X MLPA is an interesting energy fund focused on infrastructure assets.
MLPA invests in America’s largest energy infrastructure companies which provide transportation, storage, and processing of natural resources. Midstream MLPs are publicly traded partnerships that confine their operations to these specific activities. This allows them to obtain MLP status and elect to be taxed as a partnership and trade on public securities exchanges exactly like the shares of a corporation, without entity-level taxation. MLPA has $1.14 billion in net assets and charges a 0.46% management fee for its ETF. MLPA pays a quarterly distribution, and its forward yield is 7.24% as it pays $2.90 per share . MLPs typically pay high yields to investors because they do not pay corporate income taxes as the taxes are passed on to the unitholders of the specific MLP. MLPA’s inception was 4/18/12, and its never missed a quarterly distribution.
MLPA has an interesting approach that corresponds to the Solactive MLP Infrastructure Index. The Solactive MLP Infrastructure Index is designed to track the performance of companies structured as MLPs that own and operate assets used in energy logistics. Many of the company’s pipelines, storage facilities, and other assets are used in transporting, storing, gathering, and processing natural gas, natural gas liquids, crude oil, and refined products. To gain entry to the Solactive MLP index, the company must be listed on the U.S stock exchange. In addition, it is required to have a market capitalization of at least $2 billion, average daily trading volume in the last 3 months of at least $2.5 million, and maintain or grown its distribution quarter-over-quarter for at least one of the trailing 2 quarters.
Energy infrastructure companies, in general, have been horrible investments over the past decade from a chart perspective, but recently, they have been coming back to life as the energy sector caught a bid. Over the past 5-years, the SPDR S&P 500 Trust ETF (NYSEARCA: SPY ) has appreciated by 81.82%, while MLPA deprecated by -41.92%. With the energy sector catching a bid and commodity prices increasing, it looks like many of the MLPs which were hated are starting to rebound. Over the past year, MLPA has increased by 21.45%, outpacing SPY as its appreciated by 14.73%. Seeking Alpha As of 3/3/22, 19.21% of MLPA consisted of Enterprise Products Partners (NYSE: EPD ) and Energy Transfer (NYSE: ET ) which are […]
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