High-Dividend-Paying Energy Fund May Offer a V-Shaped Recovery
By: Paul Dykewicz,
High-dividend-paying energy fund Global X MLP ETF (MLPA) invests in some of the largest, most liquid midstream energy master limited partnerships (MLPs) to give investment results that generally align with the price and yield performance, before fees and expenses, of the Solactive MLP Infrastructure Index.
Right now, the high-dividend-paying energy fund’s 22.5% dividend yield is inflated due to weak oil prices and the recent market decline, after its latest quarterly payout of $0.185. It is not clear whether this dividend is safe, but the fund can likely be expected to continue to pay a hefty dividend, as MLPs usually do.
The index fund focuses on transportation, storage and processing MLPs that often have less sensitivity to energy prices. Specifically, MLPA offers investors exposure to midstream MLPs in a C-corporation exchange-traded fund (ETF).
C-corporations, unlike many exchange-traded funds (ETFs), pay taxes at the fund level. However, MLPs typically pay high yields to investors because they do not pay corporate income taxes. Plus, MLPA’s expense ratio of 0.46% is about 24% lower than the industry average.
MLPA has $450.78 million in assets under management. Its next distribution date is May 7, 2020. MLPA’s share price dipped in late March but it has been rising lately after President Trump intervened in an oil production dispute between Russia and Saudi Arabia to lift oil prices and reduce output after a severe plunge in oil prices that began to imperil the survival of certain energy companies.
Source: StockCharts.com
This midstream energy ETF allocates 76.57% of its total assets to its top 10 holdings. MLPA’s top five holdings currently are Enterprise Products Partners LP (EPD), 12.52%; Magellan Midstream Partners LP (MMP), 11.26%; MPLX LP Partnership Units (MPLX), 7.80%; Cheniere Energy Partners LP (CQP) 7.59%; and Energy Transfer LP (ET), 7.38%.
In sum, the fund is aimed at providing exposure to midstream energy holdings that are on the rise with a recent upward move in oil prices. For investors looking to gain exposure to the energy sector, the ETF offers a chance to align with the largest and most liquid midstream MLPs.
As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.
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Paul Dykewicz, www.pauldykewicz.com, is a respected, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Crain Communications, Seeking Alpha, Guru Focus and other publications and websites. Paul can be followed on Twitter @PaulDykewicz, and is the editor and a columnist at StockInvestor.com and DividendInvestor.com. He also serves as editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free weekly e-letters and other investment reports.
Paul is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. In addition, Paul serves as a commentator about investing, economics, business news, politics and motivational guidance.
Paul earned a master’s degree in business administration with a focus on finance at Baltimore’s Johns Hopkins University, where he was elected to two terms as president of its Finance Club. He earlier received a master’s degree from Michigan State University’s School of Journalism, where he was inducted into the Kappa Tau Alpha honor society. Paul received a bachelor’s degree from the University of Michigan in Ann Arbor, focusing on political science, business and economics.
