Strong Dividend Growth From Energy Midstream
Known for dividends and attractive yields, energy midstream stocks have been a hot stock sector for the last five years. For example, the Global X MLP & Energy Infrastructure ETF (MLPX) returned 239% over the last five years.
The 2025 bear market (mid-February through early April) saw the midstream sector drop by 20%, similar to the broader market. Lower share prices, however, mean higher yields and allow investors to get a leg up on the next market increase and earn significant income.
A recent article from ETF Trends provided this data about midstream dividends:
- On a year-over-year basis, 96.0% of the Alerian Midstream Energy Index (AMNA) by weighting have grown their dividends. No AMNA constituent has cut its regular dividend since July 2021.
- Dividend growth and a pullback in equity prices have increased MLP/Midstream yields, which could represent an opportunity for income investors.
- Midstream companies are expected to continue executing on dividend growth given fee-based businesses backed by long-term contracts that support stable cash flows.
That is some powerful data about the reliability and growth of dividends from the midstream sector. Let’s look at a couple of examples.
For the first quarter, Targa Resources (TRGP) increased its dividend by 33%, bringing the payout above where it was before the pandemic forced most midstream companies to slash their dividends.
In January, Plains All American Pipelines LP (PAA) increased its dividend by 20%. Since the end of 2021, the PAA dividend has more than doubled.
Individual energy midstream companies are structured as either corporations or master limited partnerships (MLPs). A decade ago, most were organized as MLPs. They have steadily converted to corporations, leaving a dozen sizeable MLPs. An MLP sends investors a Schedule K-1 for tax reporting. K-1s can make doing taxes more difficult. However, MLPs as a group carry much higher yields than their corporate counterparts. According to the ETF Trends article, the broad midstream sector has an average yield of 5.0%, while MLPs average 7.5%.
My recommended midstream investment is a top fund that I’ve been following for a decade. It’s been a core holding in the Dividend Hunter for just under a decade and an integral part of my Monthly Dividend Paycheck Calendar. This fund pays monthly dividends with an 8.5% yield. Dividends are growing by 9% per year, and the ETF has posted a 300% total return for the last five years.
This post originally appeared at Investors Alley.
Category: Dividend Stocks To Buy?
