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Despite higher cash flow growth and higher yields, MLP stocks trade at lower EV/EBITDA multiples than the broader U.S. equity market, utility stocks and REIT stocks. We remain of the opinion that this disconnect is not sustainable in the long term.
MLP stocks have not typically traded with the U.S. interest rate cycle. Over the past 10 years, there have been four previous periods where 10-year U.S. Treasury yields have increased by more than 100 basis points. MLP stocks outperformed other income-oriented equities in all four periods.
On an absolute basis, the Strategy had a negative return for the fourth quarter and underperformed its benchmark. Of the six energy MLP subsectors in which the Strategy was invested during the quarter, the natural gas transportation & storage and shipping subsectors had the least negative contributions.