ALPS Alerian MLP ETF: Looks Slick

Summary

• A year ago I had suggested that investors should consider avoiding the ALPS Alerian MLP ETF because of the COVID-19 impact, and I was not wrong. But this time, I am.
• The EIA estimates an increase in demand for fossil fuels in 2021 and 2022. The ETF invests in MLPs engaged in midstream activities and their prospects are getting better.
• I would consider investing in the ETF because it sports a tempting forward dividend yield tag of 10% and the companies it owns also have started doing very well.
• I do much more than just articles at The Lead-Lag Report: Members get access to model portfolios, regular updates, a chat room, and more. Get started today »

I had reviewed the ALPS Alerian MLP ETF (NYSEARCA:AMLP), which focuses on investing in companies that earn revenues from midstream activities, about a year ago and had rated it as an ETF to avoid because at that time COVID-19 had struck the economy and crude prices had started falling. At that time, AMLP was hovering around $33 levels, and now, as of February 9, 2021, it is available at about $29. The suggestion paid off because the ETF’s price has fallen more than the dividend the ETF declared in the period.

Image Source: My Post at Seeking Alpha

Well, things have changed since then and energy stocks are rebounding all over. It is, therefore, time to review AMLP once again. Let us start:

Energy Outlook

The U.S. Energy Information Administration (EIA) estimates that global consumption of fossil fuels will average 97.7 million barrels per day in 2021 and then jump to an average of 101.2 million barrels per day in 2022.

Image Source: EIA

The OPEC nations and particularly Saudi Arabia, which is the largest exporter of crude oil, have decided to cut production until March 2021. With vaccinations on the rise, many crude oil analysts are predicting that there will be a supply deficit in 2021, leading to higher prices.

So, with supply constraints and rising consumption, and a lot of buzz about climate change necessitating further cuts in crude oil output, I estimate that the midstream companies will be back in business in the medium term.

AMLP’s Portfolio

About 76.5% of AMLP’s total assets are invested in just 10 holdings. About 49% of its total assets are parked in just five stocks – MPLX LP (MPLX), Enterprise Products Partners (EPD), Energy Transfer (ET), Plains All American Pipeline (PAA), and Western Midstream Partners (WES).

Image Source: AMLP Website

AMLP

Analyst’s Disclosure:I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

This writing is for informational purposes only and Lead-Lag Publishing, LLC undertakes no obligation to update this article even if the opinions expressed change. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. It also does not offer to provide advisory or other services in any jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Lead-Lag Publishing, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.