Many investors’ search for income brought them to energy infrastructure in 2022.
Despite elevated inflationary pressures and tightening monetary policies weighing on markets, the energy industry is wrapping up a strong year, with global supply constraints and ongoing demand keeping oil prices elevated.
These were the three top-read stories on energy infrastructure in 2022:
1. What Russia’s Invasion Could Mean for the US Energy Landscape
Russia’s invasion of Ukraine in late February rattled global markets, leaving many investors questioning the economic repercussions of the escalating geopolitical tensions. The top-read story of 2022 was VettaFi head of energy research Stacey Morris’ insights into the potential intermediate and long-term implications, the changing energy sentiment, and the role of the U.S. in production.
While commodity prices spiked in the aftermath of the invasion, midstream’s fee-based business model limits the impact of commodity prices on cash flows. This insulates the segment from plunging prices, as seen in 2020. Some companies will enjoy upside from higher prices, particularly gathering and processing names that tend to be more sensitive to commodity prices, but relative to exploration and production companies (E&Ps) whose profits directly depend on the price of oil or natural gas, the exposure for midstream is more muted, Morris wrote.
2. Investing in MLPs: Distributions or Dividends
MLPs were top of mind as investors searched for income this year. The historical average yield of MLPs over the past 10 years has been around 7%, which means that if an investor invested $100, on average, they would be paid $7 each year.
While income has always been a primary reason that investors allocate to MLPs, interestingly, as the year evolved, so did investors’ primary reason for allocating to the segment. As midstream was among the top-returning segments of the market in 2022, more and more investors began allocating for total return, rather than income alone.
3. Top 3 Holding in ENFR to Grow Dividend 3%-5% Annually
As the search for yield remained a key theme in 2022, investors were delighted to learn that Alerian Energy Infrastructure ETF (ENFR ) holding TC Energy reported strong fourth quarter 2021 earnings, raising its dividend. Notably, this was the 22nd consecutive year the board has raised the dividend, according to the company.
For more news, information, and analysis, visit the Energy Infrastructure Channel.
vettafi.com is owned by VettaFi, which also owns the index provider for ENFR. VettaFi is not the sponsor of ENFR, but VettaFi’s affiliate receives an index licensing fee from the ETF sponsor.
