Utility Stocks are Great – But These Energy Stocks are Even Better

[ETF Daily News]( September 6th, 2023 SPONSORED AD [Small A.I. Firm Wins $2 Billion in Contracts for Breakthrough "Living Software"]( Denver firm proves its possible to use AI to save the lives of soldiers in combat. England, Germany, Japan and Australia have all signed contracts within the past 18 months. [Get the name of the stock here ]( [Utility Stocks are Great – But These Energy Stocks are Even Better]( Arecent article highlighted the differences between the different income-focused investment sectors. Investors often see energy midstream and utilities as similar infrastructure-type investments. Both pay high yields and tend to be pretty safe bets. But significant differences exist, so let’s see where best to put your money… Utility stocks, real estate investment trusts (REITs), and energy midstream companies/MLPs attract investors due to attractive yields and growing dividends. This chart comes from a recent[article]( on the VettaFi ETF Trends website. The article noted that year-to-date through August 24, utilities had posted a negative 9.1% total return. Over the same period, the Alerian MLP Infrastructure Index (AMZI) has gained 15.7%, and the Alerian MLP Infrastructure Index (AMEI) is up 8.2%. The performance difference stems from how the two sectors are managed for growth. Utilities primarily fund their growth projects with debt. Rising interest rates over the last year and a half have significantly increased the cost of capital for utility companies. Investors fear utilities will be unable to match historic dividend growth rates, or may even stop growing their payouts altogether. Before the 2014-2016 crash of energy prices and energy sector stocks, energy midstream used a similar business model, organized as master limited partnerships (MLPs). Growth projects were funded with a combination of new equity and debt. Often, 100% or more of free cash flow was paid out as distributions to investors. Growth was the goal, by developing new energy infrastructure projects and using the resulting revenue to fuel distribution growth. The energy sector crash blew up the MLP business model. The companies could no longer grow, and debt servicing ate up larger and larger portions of revenue. The entire sector was forced to restructure its business, and went through massive consolidation. In October 2014, energy midstream included 94 MLPs and corporations. After some recently announced acquisitions, the sector will be down to 21 companies, with only 10 of those organized as midstream. The shift away from relying on debt to fund new infrastructure projects is of greater importance. MLPs and midstream corporations now support growth out of retained cash flow. They have significantly reduced the dividend payout ratios. The companies in the sector have also paid down debt. Before the crash, it was common to see debt-to-EBITDA ratios of five to six times. Now, less than three times is about the standard. As a result of the near-decade of restructuring, midstream companies generate tremendous free cash flow. They can pay generous and growing dividends while… Continue reading at [INVESTORSALLEY.com]( NOTE: If URLs do not appear as live links in your e-mail program, please cut and paste the full URL into the location or address field of your browser. [Privacy Policy]( | [Terms & Conditions]( This email contains a paid advertisement.This is not a solicitation for the purchase or sale of securities. Readers are encouraged to conduct their own research and due diligence, and/or obtain professional advice, prior to making any investment decision. Advertisements and sponsorships are provided as a service to Stock News users. Stock News is not responsible for their content, services or products. The statements and opinions contained in this advertisement are not those of Stock News, and Stock News disclaims any liability for or arising from such statements and opinions. You are hereby advised that Stock News is receiving a fee as compensation for the distribution of this advertisement. [Click here to unsubscribe]( Copyright © 2023 ETF Daily News, part of StockNews.com - POWR Stock Rating, Market Outlook & Investment Insights Magnifi Communities, 1 Penn Plaza, Suite 3910, New York, NY 10019