Midstream Energy ETF Monthly Report | January

30 January 2024

Midstream Energy ETF Key Takeaways | January

Energy infrastructure remains well positioned to provide compelling income and total return for investors as companies continue to focus on free cash flow generation. At the end of December, the underlying index for the Midstream Energy ETF, AEDW, was yielding 7.0%. Companies with investment-grade credit ratings represented over 92% of the index by weighting. 

AEDW fell by -1.2% on a net total-return basis in December. Brent oil prices fell -7.0% to close the month around $77 per barrel. The STOXX Europe 600 Oil and Gas Index (SXEP) fell -0.3% on a total-return basis in December. For full-year 2023, AEDW gained 12.8% on a net-total-return basis, noticeably outpacing the 8.6% total return for the SXEP and the negative total return for the US energy benchmark. The Energy Select Sector Index (IXE) was down -0.6% for 2023.

In 2024, oil and natural gas prices are likely to remain fairly rangebound with continued volatility. This environment favours midstream given its defensive qualities, namely fee-based business models that drive stable cash flows and generous yields. Dividend growth trends and equity buybacks are expected to continue as these tailwinds from free cash flow generation remain intact. As demonstrated in 2023, energy infrastructure can work well in a more challenging energy tape. 

December saw several AEDW constituents announce 2024 EBITDA and dividend guidance. Companies that announced guidance generally projected mid-single-digit EBITDA growth in 2024, with dividend growth forecasts more varied but constructive. As of December 29, 2023, 88.4% of AEDW constituents by weighting have grown dividends in the past year, while 70.0% have a buyback authorization in place. 

 

Constituent News

Kinder Morgan (KMI, 8.20% Weight) issued guidance for 2024, including expectations for 5.0% growth in Adjusted EBITDA and a 1.8% increase to its annual dividend.

Williams Companies (WMB, 7.22% Weight) is buying six storage facilities with 115 billion cubic feet of underground natural gas storage across Louisiana and Mississippi for $1.95 billion from Hartree Partners.

Pembina Pipeline Corporation (PPL CN, 3.73% Weight) is buying Enbridge’s (ENB CN, 10.30% Weight) interest in natural gas and natural gas liquids assets for $3.1 billion. Separately, PPL guided to 2% growth in Adjusted EBITDA at the midpoint for 2024 and expects to fully fund its $880 million capital program with cash flow after dividends.

Hess Midstream (HESM, 0.47% Weight) gave an investor presentation reaffirming target growth in Adjusted EBITDA of over 10% and dividend per share growth of 5% in 2024 and 2025.

 

Sources available upon request. Data as of 30.11.2023. 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 31.12.2023

 

1M

3M

6M

YTD

12M

2Y

3Y

SI

Alerian Midstream Energy Dividend UCITS ETF

-1.22%

5.52%

9.35%

13.43%

13.43%

36.79%

84.87%

106.56%

Alerian Midstream Energy Dividend Index (NTR)

-1.17%

5.49%

9.14%

12.80%

12.80%

35.30%

81.40%

101.00%

 

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 31/12/2023

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.

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