Alerian MLP ETF
Dividend yield: 6.2%
Tracking the sector’s benchmark index — the Alerian MLP Infrastructure Index — the ALPS Alerian MLP ETF (AMLP) is the most popular way for investors to gain MLP exposure via an ETF. The fund’s nearly $7.6 billion in assets under management prove as much.
AMLP tracks the 25 largest companies in the midstream sector of the MLP universe. These midstream MLPs earn the majority of their cash flows from the transportation, storage, and processing of energy commodities. Think pipelines and gathering systems. Top holdings for AMLP include KMP and Enterprise Products Partners (EPD).
AMLP focuses on the top firms in the stable midstream sector of the market, which produces some pretty hefty dividends for investors. Currently, the ETF yields a hefty 6%. That’s a high yield, even for MLP ETFs.
The only real drawback to AMLP is very high expenses. The ETF effectively costs a whopping 5% to own — or $500 per $10,000 invested. The reason is that mutual funds technically aren’t allowed to own MLPs beyond a certain percentage of assets. In order to be MLP-focused, AMLP had to be structured as a C corporation. Essentially, the fund has to pay taxes on its holdings — leading to high expense ratio.
While that’s a significant drawback, AMLP is still the No. 1 way to gain exposure to MLPs and their high dividend yields.