Stacey Morris, Head of Energy Research at VettaFi, joins Proactive's Stephen Gunnion to delve into the key differentiators and shared traits between the midstream energy sector – included in the Alerian Midstream Energy Dividend UCITS ETF (LSE:MMLP) – and European energy majors.
Both sectors exhibit defensive qualities, but for distinct reasons: majors rely on their size and diversification, while midstream's fee-based business model bolsters its resilience. Despite a challenging year with lower earnings due to fluctuating oil and gas prices, midstream companies sustained stable cash flows, distancing them from the volatility linked to commodities.
Morris noted that this year, midstream has gained 6%, in contrast to the Euro Stoxx 600 Oil and Gas Index's lukewarm performance. The appeal of midstream lies in its robust dividends, yielding 7.4% as of August 8, and a diverse exposure across 30 constituents, positioning it as a strategic complement or diversification tool for European investors seeking steadier returns and insulation from regulatory uncertainties. The Alerian Midstream Energy Dividend UCITS ETF provides exposure to midstream energy companies involved in the processing, transportation and storage of oil, natural gas and natural gas liquids in the US and Canadian markets.
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