At the end of October, the underlying index for the Midstream Energy ETF, AEDW, returned -0.29%. Midstream yields are backed by strong underlying dividend trends. Constituents representing 87.6% of AEDW by weighting have grown their dividends over the last year. Notably, companies with investment-grade credit ratings account for over 90% of the index by weighting.
AEDW was essentially flat in October, down just 0.3% on a net total-return basis. The index performed defensively as Brent oil prices fell 8.3% and US benchmark oil prices fell by over 10% for the month. The STOXX Europe 600 Oil and Gas Index (SXEP) fell 1.1% on a total-return basis in October.
October also saw several companies announce quarterly dividends, with five constituents announcing sequential increases to their payouts. Many constituents reported third quarter earnings in late October and early November. Results were generally strong, with companies largely reporting numbers in line with or exceeding Wall Street expectations. Multiple companies raised EBITDA guidance for 2023.
Looking ahead to 2024, the midstream space is well positioned to maintain its defensiveness if oil price volatility continues, while offering attractive income. Tailwinds from free cash flow generation are expected to remain intact, supporting both dividend growth and equity buybacks.
Constituent News
MPLX (MPLX, 10.3% Weight) increased its quarterly distribution by 9.7% to $0.85 per unit, marking the second year in a row of approximately 10% distribution growth.
Energy Transfer (ET, 9.8% Weight) reported earnings for 3Q23 ahead of consensus expectations, raised 2023 EBITDA guidance, and increased its distribution by 0.8%. On November 3, 2023, ET closed its acquisition of MLP Crestwood Equity Partners, which had formerly been an AEDW constituent.
Enterprise Products Partners (EPD, 9.7% Weight) announced four new projects to support growing natural gas and natural gas liquids (NGL) production from the Permian Basin, including construction of a new NGL pipeline. EPD will convert the Seminole Pipeline from crude to NGL service in December 2023 while the new pipeline is constructed.
Williams Companies (WMB, 7.2% Weight) is a partner in two of the seven clean hydrogen hubs that were selected to receive grants from the US Department of Energy. Williams plans to build hydrogen pipelines for one of the hubs, while leveraging existing assets and expertise for the other.
Plains (PAA, 2.48%/ PAGP, 0.70% Weight) reported earnings for 3Q23 ahead of consensus expectations and raised 2023 adjusted EBITDA guidance to $2.625 billion from $2.5 billion at the midpoint. Plains will recommend that its board approve a $0.20 per unit or 19% increase for the next distribution to be paid in February 2024.
Cheniere Energy (LNG, 1.21% Weight) increased its dividend for the third quarter by approximately 10% consistent with its capital allocation plans.
Sources available upon request. Data as of 31.10.2023. Please remember that all performance figures are showing net data. Past performance is not indicative of future performance, and when you invest in ETFs your capital is at risk.
Midstream Energy ETF Performance
As of 31.10.2023
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1M
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3M
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6M
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YTD
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12M
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2Y
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3Y
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SI
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Alerian Midstream Energy Dividend UCITS ETF
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-0.22%
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0.01%
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4.70%
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7.26%
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5.31%
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21.88%
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110.25%
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95.33%
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Alerian Midstream Energy Dividend Index (NTR)
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-0.29%
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-0.29%
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4.32%
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6.62%
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4.57%
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20.40%
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105.81%
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89.99%
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Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 31/10/2023
Performance before inception is based on back tested data. Back testing is the process of evaluating an investment strategy by applying it to historical data to simulate what the performance of such strategy would have been. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance. Past performance for the index is in USD. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”) before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in this product. When you invest in ETFs and ETCs, your capital is at risk.