ETFdb Logo
ETFdb Logo
  • ETF Database
  • Channels
    • Active ETF
    • Alternatives
    • Beyond Basic Beta
    • China Insights
    • Climate Insights
    • Commodities
    • Core Strategies
    • Crypto
    • Disruptive Technology
    • Dividend
    • Dual Impact
    • Emerging Markets
    • Energy Infrastructure
    • ESG
    • ETF Building Blocks
    • ETF Education
    • ETF Strategist
    • Fixed Income
    • Free Cash Flow
    • Future ETFs
    • Global Diversification
    • Gold & Silver Investing
    • Innovative ETFs
    • Institutional Income Strategies
    • Leveraged & Inverse
    • Managed Futures
    • Market Insights
    • Megatrends
    • Modern Alpha
    • Multi-Asset
    • Night Effect
    • Portfolio Strategies
    • Retirement Income
    • Richard Bernstein Advisors
    • Tax Efficient Income
    • Thematic Investing
    • Volatility Resource
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
    • ETF Data for Journalists
    • ETF Nerds
  • Research
    • First Bitcoin ETF
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Index Education
    • Index Insights
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Multimedia
    • ETF 360 Video Series
    • ETF Trends on Videos
    • ETF Trends on Podcasts
    • ETF Prime Podcast
  • Company
    • About Us
    • Swag Store
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. Index Insights
  2. 4Q20 Midstream/MLP Dividend Recap: Steady Improvement Continues
Index Insights
Share

4Q20 Midstream/MLP Dividend Recap: Steady Improvement Continues

Michael LaitkepMar 01, 2021
2021-03-01

Summary

  • With only a single cut and a few additional names growing their dividends, the overall picture for dividends has continued to improve.
  • For AMNA, a broad midstream composite index containing both MLPs and C-Corps, 37 of 38 dividend-paying names raised or maintained their dividends sequentially for the quarter.
  • While midstream yields have moderated from the record highs seen in 2020 as a result of improved performance, they remain well above other income-oriented sectors such as REITs and utilities.

As has largely been the case since 2Q20, midstream dividends for 4Q20 were largely maintained, though there were a few examples of growth. In conjunction with annual investor days or earnings releases, some companies have also guided to dividend growth in 2021, serving as another positive sign of the improving dividend outlook. Even as midstream equities have moved higher over the last few months, midstream yields remain well above other income-oriented sectors. This note recaps 4Q20 midstream dividend announcements and discusses the outlook for dividends from here.

4Q20 Dividends: Steady trend continues with a few growers and a single cut.
Following the dividend cuts for 1Q20, midstream companies largely held their payouts steady in the subsequent quarters. The pie charts below highlight the quarter-over-quarter (Q/Q) changes to distributions/dividends for the constituents of the Alerian Midstream Energy Index (AMNA), Alerian MLP Index (AMZ), and Alerian MLP Infrastructure Index (AMZI) by comparing 4Q20 with 3Q20. For clarity, 4Q20 dividends refer to the dividends paid in 1Q21 as a result of operational performance in 4Q20. The three names in AMNA that do not pay regular dividends are Cheniere Energy (LNG), Macquarie Infrastructure (MIC), and Tellurian (TELL). Notably, MIC paid out a special dividend of $11 per share in January in conjunction with its closure of an asset sale.

This is the image alt text

With only a single cut and a few additional names growing their dividends, the overall picture for midstream dividends has continued to improve. While most names maintained, there was an increase in the number of companies who raised their dividends sequentially compared to increases made for 3Q20. For AMNA, a broad midstream composite index containing both MLPs and C-Corps, 37 of 38 dividend-paying names raised or maintained their dividends sequentially for the quarter, representing 92.7% of the index by weighting (companies not paying dividends represent 7.2% of the index). Five midstream companies increased their payouts quarter-over-quarter: MLPs Enterprise Products Partners (EPD) by 1.1%, Cheniere Energy Partners (CQP) by 0.8%, and Delek Logistics Partners (DKL) by 0.6%, and C-Corps Enbridge (ENB CN) by 3.1% and Williams (WMB) by 2.5%. The lone cut in midstream came from NGL Energy Partners (NGL), which suspended its distribution in conjunction with actions to refinance its revolving credit facility and extend debt maturities.

Noisy year-over-year comparison reflects cuts in the wake of COVID-19.
With most midstream companies holding dividends steady sequentially, year-over-year dividend changes reflect cuts that occurred in 2020 on one hand and annual growth for names that traditionally increase dividends for the fourth or first quarter on the other. The charts below compare 4Q20 dividends with the 4Q19 dividends for the constituents of AMNA, AMZ, and AMZI. Overall, 74.8% of AMNA by weighting grew or maintained dividends year-over-year, while 18.0% cut. Although a large absolute number of companies lowered their dividends in 2020, their relatively small total weighting in the index reflects the dividend consistency of large midstream companies with diverse operations and greater financial flexibility during downturns.


Content continues below advertisement

This is the image alt text

What could be in store going forward?
Each year, a few companies announce dividend growth or guidance on an annual basis into year-end or early in the new year. While some of this growth was reflected with 4Q20 payouts, others are growing payouts for 1Q21. TC Energy (TRP CN) declared a dividend of $0.87 per share for 1Q21 in February, representing a 7.4% increase for the dividend payable in April. TRP continues to guide to future annual dividend growth of 5-7%. Similarly, Gibson Energy (GEI CN) announced a 2.9% dividend increase for its dividend payable in April for 1Q21. Natural gas pipeline giant Kinder Morgan (KMI) plans to increase its dividend by 3% for 2021 in addition to targeting buybacks of up to $450 million.

Outside of guidance for growth, other companies have provided color around distributions. For example, Western Midstream Partners (WES) and Magellan Midstream Partners (MMP) have guided to maintaining payouts in 2021. Shell Midstream Partners (SHLX) has noted that future distributions will be decided by the board on a quarter-by-quarter basis, while Phillips 66 Partners (PSXP) has described the distribution as one of two main financial levers that could be utilized in the event of a Dakota Access Pipeline shutdown, with growth capex (the other lever) already significantly reduced. At least one dividend cut seems to be on the horizon for 1Q21. C-Corp Antero Midstream (AM) is guiding to annualized dividends of $0.90/share in 2021, a 26.8% reduction from 2020 subject to quarterly board approval. A smaller dividend would allow AM to accelerate $65 million of capital spending into 2021 and reduce leverage over time using excess free cash flow. A dividend cut with a view to increased growth capex would certainly be unique within midstream today. While there are exceptions, recent dividend increases and largely positive or stable guidance help to frame a resilient outlook for midstream payouts, especially as companies increasingly employ buybacks as well.

Midstream yields remain well above other income-focused sectors.
As midstream has rallied in recent months in conjunction with optimism around vaccine distribution and recovering energy demand, index yields have moderated a bit and reside slightly above long-term averages. As of February 26, MLP indexes AMZ and AMZI are yielding 9.3% and 9.2%, 50 basis points above their respective five-year averages. Similarly, midstream composite AMNA is yielding 7.2% or about 60 basis points above its five-year average. While midstream yields have moderated from lofty levels in 2020, they remain well above other income-oriented sectors such as utilities at 3.8% and REITs at 3.5%, as shown in the chart below. For investors, midstream remains an attractive option for income while also providing torque to an economic recovery.

This is the image alt text

Bottom Line
After proactive cuts in 2020 biased to the smaller players in the space, midstream payouts have proven resilient in recent quarters. Even as yields have come off their highs in conjunction with improved performance, midstream’s income proposition remains attractive in the current market environment and is complemented by tailwinds from buybacks and an improving macro environment for energy.

AMNA is the underlying index for the ETRACS Alerian Midstream Energy Index ETN (AMNA). AMZI is the underlying index for the Alerian MLP ETF (AMLP) and the ETRACS Alerian MLP Infrastructure Index ETN Series B (MLPB). AMZ is the underlying index for the JP Morgan Alerian MLP Index ETN (AMJ), the ETRACS Alerian MLP Index ETN Series B (AMUB), and the ETRACS Quarterly Pay 1.5x Leveraged Alerian MLP Index ETN (MLPR).

This is the image alt text




 

» Popular Pages

  • Tickers
  • Articles

Jan 27

Main Management Market Note: January 27, 2023

Jan 27

As Recession Signals Grow, Turn to Risk-Managed ETFs

Jan 27

HGER Acts as a Compelling Solution for Inflation

Jan 27

Mutual Fund-to-ETF Conversions: The Future in 4 Charts

Jan 27

American Century ETF Duo Hits Key Buy Signals Friday

Jan 27

ACES and AMLP Aid Investing in the Energy Transition

Jan 27

Target Long Duration, High Quality Fixed Income

Jan 27

The Sharpe-r Way to Invest

Jan 27

Structure Matters: Volatility May Make 60/40 Unclear

Jan 27

IRBA Demonstrates a Profits-Driven ESG ETF

QQQ

Invesco QQQ Trust

SPY

SPDR S&P 500 ETF Trust

VOO

Vanguard S&P 500 ETF

VGT

Vanguard Information...

SMH

VanEck Semiconductor ETF

XLK

Technology Select Sector SPDR...

VTI

Vanguard Total Stock Market...

SOXX

iShares Semiconductor ETF

BLOK

Amplify Transformational Data...

META

Roundhill Ball Metaverse ETF

Loading Articles...
Help & Info
  • Contact Us
Tools
  • ETF Screener
  • ETF Analyzer
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Performance Visualizer
  • ETF Database Model Portfolios
  • ETF Database Realtime Ratings
  • ETF Database Pro
More Tools
  • ETF Launch Center
  • Financial Advisor & RIA Center
  • ETF Database RSS Feed
Explore ETFs
  • ETF News
  • ETF Picks of the Month
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Best ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Legal
  • Terms of Use and Privacy Policy
  • © 2023 VettaFi LLC. All rights reserved.
Follow ETF Database
Follow ETF Database

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X