Home Logon FTA Investment Managers Blog Subscribe About Us Contact Us

Search by Ticker, Keyword or CUSIP       
Blog Home
Bob Carey
Chief Market Strategist
X •  LinkedIn

  Master Limited Partnerships (MLPs) Have Shined Since The Start Of The New Millennium
Posted Under: Sectors
Supporting Image for Blog Post


View from the Observation Deck 

  1. From 12/31/99-7/31/14, the Alerian MLP Index posted a cumulative total return of 1,231.79%, or an average annualized gain of 19.42%. The S&P 500 Energy Index was up 346.16% (10.79% annualized).
  2. Energy MLPs are primarily in the business of distribution and storage. Most equity investors are likely more familiar with energy companies involved in exploration and production, equipment, refining, and drilling.
  3. MLPs are limited partnerships that are publicly traded on a U.S. securities exchange. They are traditionally high cash flow businesses that pay out a majority of that cash to investors.
  4. Because MLPs distribute cash to the investor, their underlying value can be influenced by fluctuations in interest rates, particularly in the near-term. But that isn't the whole story.
  5. The cash flow distributed by MLPs is not fixed. MLP revenues are based more on the demand for energy products than the price of said products.
  6. If interest rates are rising due to an acceleration in economic activity, the demand for energy could also rise, and that could boost revenues. The opposite scenario could apply as well.
  7. Since 2000, there were five calendar years (2003, 2005, 2006, 2009 & 2013) where the yield on the 10-Year Treasury Note finished the year above where it started. The Alerian MLP Index posted a positive return in all five. Of course, past performance is no guarantee of future results.
  8. As indicated in the chart, MLPs plunged in 2008 due to the fallout from the financial crisis. Those investors who remained invested in MLPs through 2009 and beyond have been rewarded. 
  9. With the U.S. moving towards energy independence, investors may want to consider having exposure to both the distribution and production sides of the energy sector, in our opinion.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The Alerian MLP Index is a capitalization-weighted composite of energy master limited partnerships. The S&P 500 Energy Sector Index is capitalization-weighted and comprised of S&P 500 constituents representing the energy sector.

To Download a PDF of this post, please click here.

Posted on Tuesday, August 5, 2014 @ 2:27 PM • Post Link Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
Search Posts
Market Commentary and Analysis
Market Commentary Video
Monthly Talking Points
Quarterly Newsletter
Market Observations
Subscribe To Receive Email

It’s Time To Look Ahead To 2015
2 Natural Resource Sectors Have Kept Pace With 2 Defensive Sectors Since 3/24/00
The Energy Trade Is Still Working For Investors
It Looks Like Gold & Silver Miners May Finally Be Joining The Bull
Companies Are Earning Their Keep
Mexico’s Stock Market Has Lagged The Past Three Years But…
Micro-Cap Stocks Competitive Despite Modest Recovery
Listening for the Strength of Business Conditions
Investors Looking To Play The Recovery In Bank Stocks May Need Some Patience
A Midyear Snapshot Of European Equities
Skip Navigation Links.
Search by Topic
Skip Navigation Links.

The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
Follow First Trust:  
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2024 All rights reserved.