The energy infrastructure space has seen strong total returns in recent years with the positive momentum continuing in 2024. Midstream has been a bright spot among broader energy equities, which have struggled due to commodity price weakness and greater interest in growth sectors like technology. Energy’s weight in the S&P 500 has fallen to 3.3% as of Sept. 30, making it easy to overlook. (The energy sector has become more topical recently as geopolitical tension in the Middle East has boosted oil prices. However, the space was generally ho-hum in 2Q and 3Q). Midstream is unique from the rest of the energy sector. Its fee-based business models provide some insulation from commodity price weakness. Midstream/MLPs transport, process, and store energy commodities including oil, natural gas, and natural gas liquids like propane. These services are often conducted for fees under long-term contracts with annual inflation adjustments. This results in stable cash flows at various commodity prices, which also support generous dividends that enhance total return. Midstream/MLP yields can become more attractive as interest rates fall, especially given strong dividend trends in this space (read more). As shown in the chart below, the Alerian MLP Infrastructure Index (AMZI) is up 20.0% on a total-return basis, while the Alerian Midstream Energy Select Index (AMEI) is up 28.3% through the first three quarters of 2024. AMZI includes Master Limited Partnerships (MLPs) that earn most of their cash flow from midstream operations. AMEI is 75% US and Canadian midstream C-Corps and 25% MLPs. As of Sept. 30, AMZI was yielding 7.2%, and AMEI was yielding 5.6%. The broad Energy Select Sector Index (IXE) is up 7.4%, lagging midstream/MLPs as well as the S&P 500 which is up 22.1% year to date through Sept. 30.