Those tracking the performance of master limited partnerships, namely moving and storing oil and natural gas, insist that market volatility, interest rate concerns and even low oil prices won’t stop the group’s distribution growth.
“Long-term investors, if can they can withstand the volatility … will be rewarded for staying the course in the asset class,” said Jeremy Held, director of Research & Investment Strategy for ALPS Portfolio Solutions, during a webinar Wednesday.
While MLPs trade as equities, they also pay distributions back to stockholders, referred to as unitholders within the industry. Their structure allows them to avoid taxation through such distributions.
“Keep in mind during volatility to focus on the fundamentals of the space,” said Emily Hsieh, a director for Alerian, which manages the Alerian MLP Infrastructure Index. In the long term, the fundamentals for companies building and managing the energy infrastructure “still remain intact,” she adds.
In 2013, oil prices ranged from $92 to $117 a barrel and distributions rose 7.3%. In 2014, distributions improved 6.8%, when oil was priced at $59 to $106 per barrel.
In the past 12 months, distributions have increased 7.5%, while oil has seen its price limited to about $43 to $60 a barrel.
On a quarterly basis, midstream distributions jumped 1.9% in the second quarter of 2015, up from 1.5% in Q1’15 but down slightly from 2.1% in Q2’14.