MLP ETFs have generated attractive returns for investors, but remain a compelling investment opportunity as valuations in the space have not become overextended.
Valuations suggest midstream ETFs still have compelling upside potential, even as the Alerian MLP ETF (AMLP ) has generated strong returns for four consecutive years and outperformed broader energy for two consecutive years.
The MLP ETF gained 22.7% on a total return basis in 2024, while broader energy, measured by the Energy Select Sector SPDR Fund (XLE ), climbed 5.5%.
AMLP provides exposure to the Alerian MLP Infrastructure Index (AMZI). The index is a capped, float-adjusted, capitalization-weighted composite of energy infrastructure MLPs that earn most of their cash flow from midstream activities.
The MLP ETF is trading at a discount based on its underlying index’s forward EV/EBITDA multiple. AMZI ended December with a forward EV/EBITDA multiple of 8.66x based on 2026 consensus EBITDA estimates, while its three-year average is 8.78×.
See more: Now vs. Then: Why MLPs are a Better Investment Today
MLP ETF ‘AMLP’ Looks Well Positioned in 2025
January has historically been a strong month for MLPs. AMZI has had a positive total return every January since 2009, with the exception of just three years (2020, 2015, and 2016).
Additionally, MLPs are currently providing more generous yields than other segments of the energy sector. Distributions can be particularly attractive during periods of market volatility.
AMLP has a track record of producing generous income for investors. The fund’s underlying index AMZI is currently yielding 7.2% compared to its three-year average of 7.4%.
See more: Midstream ETFs AMLP & ENFR Increase Q4 Distributions
For more news, information, and analysis, visit the Energy Infrastructure Channel.
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