Dividend Yields and Returns: Which Midstream Oil and Gas ETF Outshined in 2023?

For income-focused investors, 2023 proved to be a banner year for the midstream sector, with four major funds showcasing distinct performance trajectories. The appeal of midstream oil and gas ETF investments has always centered on their capacity to deliver substantial dividend income, and this year was no exception.

Income Generation Comparison

Dividend yield remains the primary draw for midstream investors, and the disparity among the four largest funds is telling. The Alerian MLP ETF (AMLP), managing $7.3 billion in assets, leads with an indicated yield of 8.2% as of late December. The Global X MLP ETF (MLPA), with $1.5 billion under management, trails slightly at 7.8%. The Global X MLP & Energy Infrastructure ETF (MLPX, $975 million) offers 5.4%, while the First Trust North American Energy Infrastructure Fund (EMLP, $2.4 billion) lags considerably at just 4.1%.

This yield gap reflects broader structural differences. EMLP’s substantial weighting toward utilities—exceeding 45% of the fund—has diluted its income appeal compared to pure-play midstream oil and gas ETF strategies. Additionally, EMLP carries the highest expense ratio at 95 basis points, whereas AMLP charges 85 basis points, and both MLPA and MLPX charge 45 basis points.

Growth Performance Diverges Sharply

Beyond income, total return divergence was significant. Through mid-December, AMLP demonstrated superior capital appreciation, delivering 20.9% year-to-date returns. MLPA and MLPX followed with 15.7% and 14.3% respectively, while EMLP’s utilities exposure proved detrimental, delivering only 6.6%.

The midstream oil and gas ETF sector benefited from defensive positioning, M&A momentum, and improving valuations. Yet investor flows painted a more nuanced picture. AMLP attracted $276 million in net inflows year-to-date, while MLPA saw $29 million. Conversely, EMLP and MLPX experienced outflows of $346 million and $162 million respectively—suggesting investors rotated away from funds misaligned with their midstream focus.

The Takeaway

AMLP’s combination of superior yield, exceptional returns, and robust asset accumulation established it as the standout performer among the four largest funds. However, investors with specific yield targets or lower cost preferences may find alternatives worth considering, particularly MLPA and MLPX, whose modest 45 basis point fees offset their slightly lower yields and returns.