AMLP: A Strategic Income Play in Energy Infrastructure's Resilient Future

The Alerian MLP ETF (AMLP) has emerged as a compelling vehicle for investors seeking resilient income streams in the energy infrastructure sector. As global energy demand evolves and U.S. LNG exports surge, AMLP's structural advantages-rooted in its diversified portfolio of fee-based MLPs, tax-efficient structure, and robust distribution growth-position it as a strategic long-term diversifier for income-focused portfolios.

Structural Advantages: Stability Through Diversification and Fee-Based Models

AMLP's portfolio is concentrated in high-quality midstream energy infrastructure MLPs, including Enterprise Products Partners (EPD), Western Midstream Partners (WES), Plains All American Pipeline (PAA), and Energy Transfer (ET), which collectively account for over 60% of the fund's holdings, according to a TradingNews analysis. These companies operate under long-term, fee-based contracts that insulate them from commodity price volatility, ensuring predictable cash flows and distribution growth, the TradingNews analysis found. For instance, WES and PAA derive revenue from fixed-fee transportation agreements, while ET's expansive pipeline network benefits from volume-driven fee structures, as noted in an SL Advisors analysis.

The sector's structural resilience is further underscored by its forward EV/EBITDA multiple of 8.8x as of August 2025, a discount to its 10-year average of 9.7x, the TradingNews analysis notes. This valuation gap reflects undervaluation relative to historical norms, even as MLPs generate strong free cash flow and reinvest in expanding infrastructure to meet surging LNG export demand, according to an ETF Trends article.

Distribution Growth and Coverage: A Foundation for Income Sustainability

AMLP's income proposition is anchored in its constituents' improving distribution coverage ratios. The average coverage ratio for Alerian MLP Infrastructure Index (AMZI) MLPs has risen from 1.4x in 2018 to 2.3x in 2022, reflecting stronger free cash flow generation, ETF Trends reported. For example, EPD and WES have consistently maintained coverage ratios above 1.5x, enabling them to sustain and grow distributions even amid macroeconomic uncertainty, ETF Trends added.

AMLP's own distribution growth has been equally impressive. The ETF has delivered a compound annual growth rate (CAGR) of 9.7% in distributions over the past three years, with a second-quarter 2025 payout of $0.94-a 1.0% increase from the prior quarter, per ETF Trends. This trajectory is supported by disciplined capital allocation and buyback programs, which enhance unit value and reinforce income sustainability, the TradingNews analysis observed.

Tax Efficiency: Simplifying MLP Ownership

A critical differentiator for AMLP is its C-corporation structure, which simplifies tax reporting for investors. Unlike direct MLP ownership, which requires complex K-1 forms and exposes investors to unrelated business taxable income (UBTI), AMLP issues a streamlined 1099 form, according to a Yahoo Finance explainer. This structure eliminates administrative burdens and makes the ETF suitable for tax-advantaged accounts, the Yahoo Finance piece notes.

Moreover, AMLP's tax efficiency extends to its distribution composition. Historically, 80% of its distributions have been classified as tax-deferred return of capital, reducing immediate tax liabilities for investors, SL Advisors notes. While the ETF's C-corporation status subjects it to corporate-level taxation, this drag is partially offset by its ability to aggregate MLP K-1s internally, preserving net asset value (NAV) stability, ETF Trends observed.

Outlook: AMLP's Role in a Diversified Income Portfolio

The midstream sector is poised to benefit from structural tailwinds, including U.S. LNG export growth and infrastructure expansion to transport natural gas and crude oil, the TradingNews analysis highlights. AMLP's exposure to these trends, combined with its 8.1% yield as of March 2025, makes it an attractive complement to traditional income assets like bonds or REITs.

However, investors should weigh AMLP's tax drag-its five-year annual return of 4.97% lags the Alerian MLP Index's 7.42%-against its income benefits, SL Advisors cautions. For those prioritizing tax efficiency and distribution growth, AMLP remains a compelling choice, particularly in taxable accounts.

Conclusion

AMLP's structural advantages-diversified fee-based MLPs, improving distribution coverage, and tax-efficient C-corporation structure-make it a robust long-term income diversifier. As energy infrastructure demand accelerates, AMLP's focus on resilient cash flows and disciplined capital allocation positions it to deliver sustainable yields in an evolving market.