The Transformative Investment Prowess of MLPs
The energy industry in America has outperformed most bond and equity markets during the last decade. The annual return for shareholders in the sector has exceeded 32 percent, which the S&P 500 has returned only 19 percent.
Aschere Energy Dallas believes one of the methods an investor can capitalize on this opportunity is through Master Limited Partnerships (MLPs), which are tax-savvy offerings that enable investors to take a share in energy sector assets throughout North America, including crude and natural gas wells, storage infrastructure and pipeline assets.
One method investors can acquire exposure to the benefits of this market is through Exchanged-Traded Funds (ETS). Investment analysts believe that this approach can provide an investor with portfolio diversity as well as leverage to capitalize on the trend. Investors have access to benefits related to the shale revolution occurring in the United States as well as the strong income opportunities affiliated with the investment vehicles.
MLP pricing fluctuations do not move with the value of the underlying product. So, investors are protected even as the prices of natural gas or oil experience volatility in the markets.
These invest vehicles provide investors with an opportunity grow capital as well as increase dividend payments over time.
According to Aschere Energy Dallas, some MLPs offer investors more than a 9 percent yield on equity stakes, while also featuring approximately 10 percent increase in share price annually, thereby providing investors with potentially almost a 20 percent return on their equity.
By the end of October this year, these MLPs have already yielded 15 percent, and their dividend is expected to expand beyond 6 to 7 percent.
At the same time, Aschere Energy believes investors should consider some of the affiliated fees of ETF vehicles as they do affect minimally the overall return these investment vehicles provide.
The macro and geopolitical forces at work also serve to buttress continuous growth and subsequent attractiveness of these investment tools.
Per the U.S. Energy Information Administration, American natural gas generation is expected to increase by 56 percent from 2012 to 2040. For crude oil, the expected growth projection is 50 percent from 2012 to 2019.
To maintain this growth and investment outlook, the Interstate Natural Gas Association in the United States believes that almost $641bn, or $30bn annually, will be needed to enhance the power midstream infrastructure in America from 2014 to 2035. Ultimately, Aschere Energy believes MLPs will be a critical component of this development.