Framing Current Midstream/MLP Yields With Stress Tests
Published Jul 17, 2020 on Seeking Alpha

Seeking AlphaCommodities  | Market OutlookFraming Current Midstream/MLP Yields With Stress TestsJul. 17, 2020 8:00 AM ET|| Includes: AM, AMJ, AMJL, AMLP, AMU, AMUB, AMZA, ATMP, BMLP, CBA, CEM, CEN, CTR, DSE, EMLP, EMO, ENB, ENFR, EPD, ET, FEI, FEN, FMO, FPL, GEL, GER, GMZ, ILPRX, IMLP, IPPLF, JMF, JMLP, KEYUF, KMF, KYE, KYN, MIE, MLPA, MLPB, MLPI, MLPO, MLPQ, MLPS, MLPX, MLPZ, NML, NTG, PAA, PAGP, PBA, SMM, SRF, SRV, TRP, TTP, TYG, WESby: AlerianAlerian Master limited partnerships, oil & gas, energy, natural resourcesAlerian Insights.cls-1{fill:#024999;}SummaryDespite the decrease in midstream yields in recent months, yields for both the Alerian MLP Infrastructure Index (AMZI) and the Alerian Midstream Energy Select Index (AMEI) are above their historical averages at 12.5% and 8.8%, respectively, as of July 10.
Given improved financial positioning entering the current downturn and with most needed dividend cuts likely completed, midstream income appears to be more durable today.
Even in a stress test, midstream maintains a considerable yield advantage over REITs and Utilities.

After several cuts in 1Q20 payouts, midstream dividends today seem much more durable. However, yields remain elevated relative to history given ongoing weakness in equity performance. As mentioned in Tuesday's note, we view dividend cuts as less likely for 2Q20. While still early, seven names have already announced that they are maintaining their payouts. Today's piece examines current midstream yields relative to the highs from March at the index and company level. Additionally, current yields and a stress test of those yields are compared to the payouts from other income-oriented sectors.
Yields remain elevated after pulling back from record highs in mid-March. One way of telling the story of midstream in 2020 so far is through yields, which have historically been an important consideration for income-focused investors looking at the space. On March 18, the yields of both the... Read more