- The
Alerian Midstream Energy Dividend Index (AEDW) jumped 19.36% during November on
a net total return basis as vaccine progress supported oil prices and energy
equities.[1]
- Even
with November’s gains, the current yield for the underlying index for The Alerian Midstream Energy Dividend UCITS ETF (MMLP), our midstream energy ETF, is 9.57% or almost 200 basis
points above its five-year average.[2]
- The
strong midstream performance in November on the heels of vaccine developments exemplified
the potential upside for the sector.
Performance Review
- November: AEDW 19.36%
- WTI oil prices increased 26.68% in November but are still down 25.75%
YTD through 30 November.
Yield
The current yield for
AEDW is 9.57% (as of 30.11.2020), which is elevated relative to the five-year average of 7.63%.
Alerian Midstream Energy Dividend Index Performance
November*
|
12 Month**
|
19.36%
|
-20.18%
|
Past performance is no
guarantee of future performance.
Source: Alerian
Based on net total return.
* November figures based
on 30.10.20 – 30.11.20
** 12-month figures
based on 29.11.19 – 30.11.20
Dividend Yield
Current performance is no guarantee of future performance
Index yield annualizes the most recent dividend
announcement for each constituent and takes into account current index
weightings.
November figure based on
30.11.20
Source: Alerian
What
has driven this performance?
Energy, including midstream, rallied in
November on the heels of positive vaccine developments, which supported gains
in oil prices. The month’s performance exemplified the upside potential for
energy if a successful vaccine can help boost an oil demand recovery.
The fee-based nature of midstream and stable
cash flows continue to differentiate midstream from the rest of energy. The
AEDW Index is down -26.81% on a net total return basis YTD through 30 November,
but 2020 and 2021 EBITDA estimates for the index
have fallen by only -4.2% and -9.3%, respectively, from January 31 (pre-COVID) to
the end of November. As of 30 November, 84.0% of AEDW was investment-grade
companies by weighting, and the index was trading at 9.5x consensus 2021 EBITDA estimates compared to a historical (ten-year)
EV/EBITDA average multiple for midstream of ~12x.
While the broader energy
sector, represented by the Energy Select Sector Index (IXETR), outperformed the
underlying index for our midstream energy ETF during November, AEDW has outperformed IXETR by
nearly 900 basis points year-to-date on a total-return basis.
Current/past performance is no
guarantee of future performance.
Source of all data: Alerian, Bloomberg
Alerian Midstream Energy
Dividend Index (NTR) and MLP ETF Performance
Total Return NAV to Date (up to 30/11/2020)
|
1M
|
3M
|
6M
|
YTD
|
12M
|
Since Inception
|
Alerian Midstream Energy Dividend UCITS ETF
|
19.65%
|
4.93%
|
-
|
10.60%
|
-
|
10.60%
|
Alerian Midstream Energy Dividend Index (NTR)
|
19.36%
|
7.38%
|
2.88%
|
-26.81%
|
-20.18%
|
10.19%
|
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. Source: Alerian. Data as of 30/11/20
Industry News
Buybacks gain traction in
midstream.
Four names in AEDW announced
buyback authorizations in November, bringing the total number of constituents
with buyback programs to twelve. As shown below, 50.3% of the index by
weighting has buyback authorizations in place. Elevated yields and discounted equity
values make buybacks an appealing option for capital allocation as companies
generate free cash flow.
Company Name
|
Ticker
|
AEDW Weight
|
Total Authorization ($ millions)
|
Spent to Date Through 9/30 ($ millions)
|
Date Announced
|
Antero Midstream Corporation
|
AM
|
2.26%
|
300
|
151
|
12/08/2019
|
Energy Transfer LP
|
ET
|
10.25%
|
1,000
|
1,089
|
18/02/2015
|
EnLink Midstream LLC
|
ENLC
|
0.65%
|
100
|
--
|
04/11/2020
|
Enterprise Products Partners LP
|
EPD
|
10.15%
|
2,000
|
255
|
31/01/2019
|
Gibson Energy Inc[3]
|
GEI
|
0.52%
|
245
|
--
|
27/08/2020
|
Kinder Morgan Inc
|
KMI
|
8.45%
|
2,000
|
575
|
19/07/2017
|
Magellan Midstream Partners LP
|
MMP
|
3.25%
|
750
|
252
|
21/01/2020
|
MPLX LP
|
MPLX
|
9.86%
|
1,000
|
--
|
02/11/2020
|
NGL Energy Partners LP
|
NGL
|
0.35%
|
150
|
--
|
30/08/2019
|
Plains All American Pipeline LP[4]
|
PAA
|
2.40%
|
500
|
--
|
02/11/2020
|
Targa Resources Corp
|
TRGP
|
0.33%
|
500
|
--
|
04/11/2020
|
Western Midstream Partners LP
|
WES
|
1.86%
|
250
|
--
|
09/11/2020
|
|
|
|
|
|
|
|
Total
|
50.31%
|
|
|
|
Index weightings are as of /2020.
Source: Alerian, Company Reports as of 11/30/2020
Constituent News
Enbridge Inc. (ENB)
initiated a target of net zero greenhouse gas (GHG) emissions by 2050, with a
medium- term goal of lowering GHG emissions intensity by 35% before 2030.[5] Additional ESG goals included improved workforce diversity, Board diversity,
and enhanced reporting around safety and reliability. Within AEDW, Williams
Companies (WMB) is also targeting net zero emissions by 2050. Read more on ESG considerations for AEDW
TC Energy (TRP) held
a virtual investor day this month highlighting expectations for long-term
growth. Management reiterated guidance for 10% dividend growth in 2021 and
dividend growth of 5-7% beyond 2021. The company continues to progress a $37
billion project portfolio that will generate fees under regulated cost
structures or long-term, take-or-pay agreements.[6]
Dividend updates
– The vast majority of AEDW constituents maintained their 3Q20 dividends
sequentially, though Energy Transfer (ET, 10.25% weight) and NGL Energy
Partners (NGL, 0.35%) announced cuts. (Weights as of 16 October 2020.) Cheniere
Energy Partners (CQP, 3.19% weight), which has grown its distribution
consistently this year, guided to distribution growth of 1.9% at the midpoint
for 2021.[7]
Outlook
Looking ahead to 2021,
energy, including midstream energy infrastructure, clearly stands to benefit
from an improved outlook for the global economy and oil demand. Energy has been
one of the sectors most negatively impacted by the pandemic, and a successful
vaccine would be constructive for a recovery in oil demand next year. The
strong midstream performance in November on the heels of vaccine progress
exemplified the potential upside for the sector. With oil prices currently
around $45 per barrel, the recovery remains in early stages with plenty of room
for additional improvement in oil prices and energy equities. Furthermore, any
shift from growth to value could also be broadly supportive for energy.
Specific to midstream, companies are well positioned to generate meaningful
free cash flow next year, with many names expected to have excess cash even
after making generous dividend payments. To this end, several companies have
initiated buyback programs this year, which could be an added tailwind for
midstream equities in 2021. Midstream energy infrastructure is well positioned
to provide attractive income to investors with the potential for total return
as well.
Product Details
The Alerian Midstream Energy Dividend UCITS ETF (MMLP) is a UCITS compliant
Exchange Traded Fund domiciled in Ireland. Due to list in July and August.
Our midstream energy ETF seeks to provide diversified exposure to energy companies involved in the
processing, transportation and storage of oil, natural gas and natural gas
liquids in the US and Canadian markets and includes MLPs and C-corps.
It is
the first UCITS ETF to provide exposure to the energy infrastructure sector via
an Alerian index. By employing a synthetic strategy, the midstream energy ETF enables efficient
replication of the index.
Please
remember that the value of your investment may go down as well as up and past
performance is no indication of future performance.
Exchange |
Bloomberg Code |
RIC |
ISIN |
SEDOL |
Currency |
TER |
London Stock Exchange
|
MMLP LN
|
MMLP.L
|
IE00BKPTXQ89
|
BMVFZ02
|
USD
|
0.40%
|
London Stock Exchange
|
PMLP LN
|
PMLP.L
|
IE00BKPTXQ89
|
BL96TT7
|
GBP
|
0.40%
|
Borsa Italiana
|
MMLP IM
|
MMLP.MI
|
IE00BKPTXQ89
|
BMHVZQ0
|
EUR
|
0.40%
|
Deutsche Boerse Xetra
|
JMLP GY
|
JMLP.DE
|
IE00BKPTXQ89
|
BMHVZP9
|
EUR
|
0.40%
|
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