AMLP, or the Alerian MLP ETF, is an exchange-traded fund that invests in master limited partnerships (MLPs). As an ETF, AMLP provides diversified and tax-efficient exposure to the MLP asset class. With over $5 billion in assets under management, AMLP tracks the Alerian MLP Infrastructure Index and holds over 20 MLPs engaged in energy infrastructure such as pipelines and storage facilities. Many investors are interested if AMLP is a good way to gain exposure and benefit from MLP investments.
AMLP provides diversified MLP exposure and tax advantages
As an ETF, AMLP provides exposure to a basket of over 20 MLPs across various energy infrastructure subsectors. This provides diversification across the MLP asset class and reduces concentration risk compared to investing in individual MLPs. Additionally, as an ETF, AMLP helps resolve the tax and administrative burdens of direct MLP investments. Distributions from AMLP are reported on Form 1099 rather than Schedule K-1, providing significant tax advantage.
AMLP has delivered solid returns with high dividend yield
Over the past 5 years, AMLP has delivered annualized returns of over 3%, outperforming the S&P 500. Going forward, analysts expect MLPs to benefit from growing US energy production and export capacity. Currently, AMLP offers a high dividend yield of over 8%. However, MLP distributions are not guaranteed and depend on cash flows of underlying projects.
AMLP provides efficient access but has risks
As an ETF, AMLP provides a low-cost, liquid, and transparent way to gain exposure to MLPs. However, MLPs carry their own risks related to commodity price fluctuations, rising interest rates, and project risks. The ETF structure may also cause AMLP to trade at a premium or discount to the net asset value of its holdings.
In summary, AMLP offers a diversified and tax-efficient way to invest in MLPs. It provides exposure to the MLP asset class through a basket of over 20 MLP investments in energy infrastructure. While MLPs carry risks, AMLP’s diversification, high yield, and tax advantages help mitigate some of the drawbacks.